Accelerating Achievement: PNC Annual Report 2011

From the
Chairman
March 7, 2012

To Our Shareholders,
As I think back to the beginning of 2011, it was
predicted that banks would be facing an operating
environment dominated by low interest rates,
slow economic growth and new and challenging
regulations. As it turned out, 2011 was all that it
was advertised to be ... and then some.

PNC Stands Out Last year we said we would grow the number of
customers we serve, manage risk and expenses, and continue to build our
already strong capital position. And we succeeded in these turbulent times.
By focusing on these strategies, we had a good year in 2011, with net income
of $3.1 billion or $5.64 per diluted common share. We believe that our
distinctive corporate culture, with its focus on teamwork and executing for
all our constituents, drove our success.
 Banking in a New Environment As I look at the business world today, theres
no doubt that we are experiencing unprecedented change. Less than a decade ago Twitter didnt
exist. Neither did Facebook or Skype. Blockbuster was the number one entertainment company in
the United States, and Apple was rumored to be on the verge of bankruptcy.

In the banking industry, we are experiencing sweeping changes in customer preferences and almost
daily advances in technology. We are operating at a time of historically low interest rates, important
new regulations and a challenging political environment.

At PNC, we have always taken the long view. While some banks regard the current environment as
While some banks regard the current a time for contraction, we see it as an opportunity. And we believe we are
environment as a time for contraction, we see better positioned today than we have ever been in the 160-year history of
it as an opportunity. And we believe we are
the company.
better positioned today than we have ever
been in the 160-year history of the company.
Our capital and liquidity positions are strong. We have a highly competitive
set of products and services to meet our customers needs. Our existing markets are profitable and
we are entering new ones that provide the potential for significant growth. And we have outstanding
employees who are led by a management team that is committed to delivering for our customers,
shareholders and communities.

PNCs performance over time is reflected in our share price. For the last five-year period, we have
ranked first in cumulative total shareholder return among our peer banks.* Although our share
price declined 5 percent in 2011, the S&P 500 Banks index declined by 12 percent.

While these are good results on a relative basis, no one ever made money on a relative basis.
At PNC we manage our business with the goal of creating opportunities for increased shareholder
value over the long term.

Tier 1 Common Capital Ratio Meeting Our Highest Capital Priorities In the
At Year End
10.3% current regulatory environment, great attention is being paid to capital
9.8%
adequacy and for good reason. Banks need sufficient capital to weather
changes in the global economy.
6.0%
Today, most U.S. banks have stronger capital and liquidity than at the height of
the 2008 downturn. In fact U.S. bank capital ratios are at their highest levels in
six decades.
2009 2010 2011

* PNCs 2011 peer group consists of BB&T Corporation, Bank of America Corporation, Capital One Financial Corporation, Comerica Incorporated,
Fifth Third Bancorp, JPMorgan Chase & Co., KeyCorp, M&T Bank Corporation, The PNC Financial Services Group, Inc., Regions Financial
Corporation, SunTrust Banks, Inc., U.S. Bancorp, and Wells Fargo & Company.
 PNC is working to restore confidence James E. Rohr
Chairman and Chief Executive Officer
in Americas financial institutions.

On a relative basis, PNC remains among the best capitalized banks in our peer group. At year end,
our Tier 1 common capital ratio was 10.3 percent, more than double what it was at the end of 2008.
That capital strength and earnings supported our decision to increase the common stock dividend
in the second quarter of 2011, a decision we were pleased to deliver to our shareholders.
Tangible $44.38
Our future capital plans will depend on various factors, including the final
Book Value
Basel III capital rules and the Federal Reserves ongoing requirements for Per Share

capital planning by large banks. While Basel III capital requirements are still
a long way from being fully phased in and a number of items are yet to be
resolved, we believe that we are very well positioned.
$17.58
For 2012, we continue to focus on three capital priorities. First, we will build +152%
capital to support our clients, increase customer relationships and invest in
our businesses. Second, we must maintain appropriate capital in light of global
12/31/07 12/31/11
economic uncertainty. Finally, we expect to return excess capital to shareholders
as appropriate, subject to regulatory approval.

An important measure of any stock is its tangible book value per share, and PNCs more than
doubled from 2007 to the end of 2011. This metric dramatically outperformed the average of our
peers during the same period.**

** We believe that tangible book value per share, a non-GAAP measure, is useful as a tool to help to better evaluate growth of the companys
business apart from the amount, on a per share basis, of intangible assets other than servicing rights included in book value. Our book
value per share was $61.52 at year-end 2011, a 41% increase over $43.60 at year-end 2007. Subtracting approximately $9.0 billion ($10.1
billion of goodwill and other intangible assets less $1.1 billion of servicing rights) or $17.14 per share for year-end 2011, and subtracting
approximately $8.9 billion ($9.6 billion of goodwill and other intangible assets less $0.7 billion of servicing rights) or $26.02 per share for
year-end 2007, results in a tangible book value per share of approximately $44.38 for year-end 2011, a 152% increase over approximately
$17.58 at year-end 2007.
 Serving More Customers We had an exceptional year for customer growth in
2011. In our Retail Bank, checking relationships increased by almost 300,000, including some
40,000 from acquisitions. That represents 5 percent growth, which substantially surpassed the
1 percent population increase in our footprint, demonstrating that PNC is winning market share.
Checking Relationships
Thousands We believe some of this growth was driven by disruption in the marketplace. Checking accounts,
5,761 while traditionally profitable, have come under intense pressure as an extended period of low
5,465
interest rates and regulatory changes eroded their value.

+5% Some of our competitors responded by adding incremental fees to existing products, and many
banks eliminated free checking. PNC took a different path.

We chose to offer our customers more in return for their business. In March of 2011, we
2010 2011
introduced a new suite of checking products designed to provide more choices for customers,
moving them away from free checking and into stronger, deeper, more profitable relationships
with the bank based on cross-selling other products, such as home equity and mortgage loans.
We also decided to continue to offer free checking.

At the beginning of 2011, approximately 70 percent of PNCs new checking customers had
free checking accounts. By the fourth quarter of 2011, we had flipped the ratio of free checking
to relationship checking accounts, with nearly 60 percent of new customers now choosing
relationship accounts.

In our Corporate & Institutional Bank, new primary client acquisitions in Corporate Banking
were 1,165, an increase of 15 percent over the new primary clients we added in 2010. This
marks the second consecutive year we added more than 1,000 new primary clients.
Corporate Banking
New Primary Clients In addition to adding new customers, C&IB had a record year on several other fronts: the

1,165 number of agent-led deals and new transactions in business credit as well as cross-selling its
1,012
products. Looking ahead to our opportunities in this area, if we could cross-sell our new C&IB
clients to the same degree as our existing customers, it would add approximately $200 million
of incremental revenue.

2010 2011 We ranked second in the number of middle market business loans arranged in 2011. As we
grow, we see opportunities to lead syndications for larger corporate clients at higher dollar
amounts.

New client acquisition in our Asset Management Group continued to grow to record levels in
2011, fueled in part by significant increases in referrals from retail branches and corporate
bankers. Overall sales were up nearly 40 percent for 2011 compared to 2010, with referral
activity representing one-third of the total sales results.
Increasing Lending Our customer growth helped to drive increased lending in
2011. Loan growth accelerated toward the end of the year, with $4.5 billion of the $8.4 billion
annual increase occurring in the fourth quarter. Overall, we grew loans by 6 percent during
2011, with gains in commercial loans, indirect auto and education lending.
Total Loans
Tepid growth in the gross domestic product along with low interest rates had a dampening At Year End
Billions
effect on the banking industry in 2011, and we expect those factors to persist. In this
$159.0
challenging environment, our balance sheet provides us with options to enhance our net $150.6

interest income through continued loan growth and repricing our deposit business.

We have significant opportunities to reduce funding costs through the repricing of certificates
of deposit and maturing debt as well as the potential to redeem relatively high-cost trust
preferred securities. In the fourth quarter of 2011 alone, we saw $6 billion of certificates of
deposit mature, and we called $750 million of trust preferred securities. We expect to see 2010 2011
additional opportunities to reduce funding costs in 2012.

Growing and Strengthening the Franchise During 2011 we

leveraged our financial performance and resulting capital strength to invest in our businesses.
We also announced several strategic acquisitions. These included purchases in greater Tampa,
Florida, of 19 branches from BankAtlantic, and 27 branches in the Atlanta area from Flagstar.
The acquisition of RBC Bank (USA), the U.S. retail banking operation of the Royal Bank of
Canada, closed and converted on March 2 of this year and is expected to be accretive to our
2012 earnings, excluding integration costs.

The RBC transaction added more than 400 Southeastern U.S. branches to PNCs powerful retail
franchise. With RBC Bank (USA), PNC has approximately 2,900 branches in 17 states and the
District of Columbia. Since the beginning of 2008, this represents an increase of almost 1,800
branches and nine new states.

At PNC, acquisition was only one part of our growth story in 2011. Throughout the year, we
continued to add more customers and deepen our relationships with them across our existing
footprint, and all of our legacy markets exceeded their sales plans.

To support this growth, we developed innovative products and services focused on the needs of
tomorrows banking and investing clients. We applied an understanding of customer trends
the roughly flat growth of branch and call center activity, the ongoing decline in check writing,
the expansion of online and mobile payments, and the increased use of multiple distribution
channels to give customers a top-flight banking experience.

One example, the PNC Virtual Wallet payments platform, has grown rapidly since its
introduction more than three years ago. At times in 2011, we added 14,000 new users every
 week. More than 750,000 customers now use Virtual Wallet and it represents 50 percent of our
new checking relationships.

We followed our Virtual Wallet success with the introduction of bolt-on products to serve distinct
customer segments, including students and those who prefer banking on their smart phone
device. And in 2011, we introduced PNC Wealth InsightSM, a platform that gives investors a
snapshot of their net worth at any time. We already have nearly 10,000 customers using it.

Managing Risk As 2012 begins, the U.S. economy is showing signs of improvement,
and we are optimistic about the ongoing recovery, albeit at a deliberate pace. At the same time,
we are mindful of the impact that sustained high rates of unemployment and slow GDP growth
could have on our business. As a result, credit risk remains a priority for us.

we believe adherence to the Our nonperforming assets declined and our provision for credit losses and net
risk management principles we
charge-offs significantly improved in 2011. Overall, we remain committed to a
have established will continue to
serve us well.
moderate risk profile.

We take a similar approach in managing our balance sheet. I am fond of saying that every company
will eventually meet its balance sheet. We have met ours, and we like it. Our balance sheet remained
highly liquid and core funded with an 85 percent loan-to-deposit ratio at the end of the year.

Looking ahead, we are focused on managing our balance sheet effectively, adding clients that
meet our standards for risk-adjusted returns and making enhancements to risk management
capabilities and technologies.

While challenges remain, we believe adherence to the risk management principles we have
established will continue to serve us well.

Assembling a Strong Team It takes teamwork to achieve results, and in 2011,

our employees were more engaged than ever. We won a Gallup Great Workplace Award and were
the only U.S. bank to be recognized for this achievement.

Our effort to engage the workforce includes improving diversity at PNC. In 2011, we launched a
number of Employee Business Resource Groups Latino, African-American, Women, and Gay,
Lesbian, Bisexual and Transgender among them. For the benefit of both employees and customers,
we dramatically increased the amount of outreach we do in Spanish.

PNC has continued to hire employees throughout the economic downturn, and we seek top talent
at all levels across our franchise. As we begin our recruiting process in the Southeast, we have
received more than 10,000 external applications to join our firm in that region.

We also enhanced our management team. We named Joe Guyaux, a 40-year PNC veteran who
most recently led Retail Banking, as our chief risk officer. In todays risk environment, we could find
no better leader than Joe given his tremendous banking knowledge and his history of excellence in
every role he has had at the firm. Neil Hall, who has overseen our retail distribution system since
2005, will now manage Retail Banking. And last year we recruited Mike Lyons to lead our Corporate
& Institutional Bank.

Maintaining Our Reputation Public outreach has helped sustain our reputation
as a strong and reliable bank in spite of the difficult environment. In fact earlier this month, we were
ranked second on Fortunes list of most-admired companies in the category of superregional banks.
Awareness of our brand has been enhanced since the beginning of the Achievement advertising
campaign in 2010, rising from 57 percent to 74 percent today.

A good reputation could not be more important in this environment, and while our reputation is solid,
the industry as a whole is under intense scrutiny. Trust has plummeted from about 70 percent of the
public saying they had confidence in financial services companies in 2008 to about 25 percent in 2011.

PNC is working to restore confidence in Americas financial institutions. We have joined with others
to form the Partnership for a Secure Financial Future. The Partnership is committed to raising
awareness of the vital role the financial services industry plays in growing the nations economy,
creating new jobs and supporting small businesses.

Similarly, PNC has committed to renewed efforts at the state and local level that have enhanced
coordination between PNC and community leaders working on topics such as economic
development and mortgage servicing practices.

Giving Back to the Community PNC has continued to deliver for its
communities. Overall, we contributed nearly $69 million to strengthen and enrich the lives of
those in the places where we had a significant presence in 2011.

Importantly, we met our original $100 million goal for Grow Up Great by mid-2011, two years earlier
than expected. In just eight years, we have helped more than a million children under age five
prepare for school and life. We followed that success by expanding Grow Up Great in 2011. Today,
this is a $350 million initiative that will also kick off in the Southeast as PNC builds its presence there.

PNC knows something about building. We have more environmentally friendly buildings LEED-
certified by the U.S. Green Building Council than any company on Earth. Our most remarkable
building is yet to come. In May, we announced that PNC would undertake the construction of a new
headquarters. We expect The Tower at PNC Plaza, at the same intersection where PNC is currently
located, to be the most energy efficient office building in the world when it opens in 2015.

PNC earned another Outstanding Community Reinvestment Act rating from our regulators in
2011. And we believe we are an outstanding company, working hard for shareholders, customers,
employees and communities.
 New Challenges and New Opportunities This year will bring new
challenges and a continuation of some past ones. The Federal Open Market Committee has
signaled low interest rates into 2014. An already difficult political climate will feature a highly
contentious presidential election. The economic outlook is for a modest recovery, but that
depends on events over which we have little or no control. From the European debt crisis to
American consumers worries about jobs and housing, the dangers are many. In this environment,
all banks will be challenged.

Five years from now, we want to Despite these circumstances, we believe we are better off than virtually all of our
look back at this moment and say: competitors on a relative basis. The longer these conditions exist, the greater our
We saw the opportunity and
opportunities for market share growth at the expense of smaller banks that are
we made the most of it.
either unwilling or unable to deploy the necessary resources to overcome increased
regulatory expenses, reduced fees and low rates. This environment also affects global banks, which
are facing higher capital requirements along with regulations that will limit some business activities.

For large regional banks like PNC, regulatory changes represent a considerable work set, but
we believe it is manageable. We must move forward to seize this moment, execute on our priorities
and continue to build our business. Five years from now, we want to look back at this moment
and say: We saw the opportunity and we made the most of it.

There is no magic formula to make the industrys challenges disappear. At PNC, we believe our
effective leadership team, focus on more and deeper customer relationships, strong risk and
expense management, and a solid reputation for acting in our customers best interests remain
the best strategy.

In difficult times, it is important to take the long view, and that is something we have always done
at PNC. This year marks our 160th as PNC traces its roots to 1852, when the Pittsburgh Trust
Company opened near Fifth Avenue and Wood Street, the same corner where our headquarters
stands today. More than a century and a half later, PNC remains committed to helping businesses
and consumers achieve their goals.

We are proud of our companys performance in 2011 and are confident that our best days lie ahead
as we continue to build a great company. As it has for the last 160 years, you can expect PNC to
deliver for our customers, shareholders, employees and communities.

Sincerely,
For more information regarding certain factors
that could cause future results to differ, possibly
materially, from historical performance or from
those anticipated in forward-looking statements,
James E. Rohr see the Cautionary Statement in Item 7 of our
2011 Annual Report on Form 10-K, which
Chairman and Chief Executive Officer accompanies this letter.
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2011
Commission file number 001-09718

THE PNC FINANCIAL SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)
Pennsylvania 25-1435979
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
(Address of principal executive offices, including zip code)
Registrants telephone number, including area code - (412) 762-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, par value $5.00 New York Stock Exchange
Depositary Shares Each Representing 1/4000 Interest in a Share of 9.875% New York Stock Exchange
Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series L, par value $1.00
12.000% Fixed-to-Floating Rate Normal Automatic Preferred Enhanced Capital New York Stock Exchange
Securities (issued by National City Preferred Capital Trust I)
6.625% Trust Preferred Securities (issued by National City Capital Trust III) New York Stock Exchange
8.000% Trust Preferred Securities (issued by National City Capital Trust IV) New York Stock Exchange
6.125% Capital Securities (issued by PNC Capital Trust D) New York Stock Exchange
7 3 4% Trust Preferred Securities (issued by PNC Capital Trust E) New York Stock Exchange
Warrants (expiring December 31, 2018) to purchase Common Stock New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

$1.80 Cumulative Convertible Preferred Stock - Series B, par value $1.00
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes X No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No X
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes X No
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. X
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer X Accelerated filer Non-accelerated filer Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No X
The aggregate market value of the registrants outstanding voting common stock held by nonaffiliates on June 30, 2011, determined using the per
share closing price on that date on the New York Stock Exchange of $59.61, was approximately $31.3 billion. There is no non-voting common
equity of the registrant outstanding.
Number of shares of registrants common stock outstanding at February 17, 2012: 527,568,487
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement of The PNC Financial Services Group, Inc. to be filed pursuant to Regulation 14A for the 2012 annual
meeting of shareholders (Proxy Statement) are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS ITEM 1 BUSINESS
PART I Page BUSINESS OVERVIEW
Item 1 Business. 2 Headquartered in Pittsburgh, Pennsylvania, we are one of the
Item 1A Risk Factors. 11 largest diversified financial services companies in the United
Item 1B Unresolved Staff Comments. 23
Item 2 Properties. 23 States. We have businesses engaged in retail banking,
Item 3 Legal Proceedings. 24 corporate and institutional banking, asset management, and
Item 4 Mine Safety Disclosures. 24 residential mortgage banking, providing many of our products
Executive Officers of the Registrant 24 and services nationally and others in our primary geographic
Directors of the Registrant 25 markets located in Pennsylvania, Ohio, New Jersey, Michigan,
PART II Illinois, Maryland, Indiana, Kentucky, Florida, Washington,
Item 5 Market for Registrants Common Equity, D.C., Delaware, Virginia, Missouri, Wisconsin and Georgia.
Related Stockholder Matters and
Issuer Purchases of Equity Securities. 25 We also provide certain products and services internationally.
Common Stock Performance Graph 26 At December 31, 2011, our consolidated total assets, deposits
Item 6 Selected Financial Data. 27 and total shareholders equity were $271.2 billion, $188.0
Item 7 Managements Discussion and Analysis billion and $34.1 billion, respectively.
of Financial Condition and Results of
Operations 29 We were incorporated under the laws of the Commonwealth
Item 7A Quantitative and Qualitative Disclosures of Pennsylvania in 1983 with the consolidation of Pittsburgh
About Market Risk. 101
Item 8 Financial Statements and Supplementary National Corporation and Provident National Corporation.
Data. 101 Since 1983, we have diversified our geographical presence,
Item 9 Changes in and Disagreements With business mix and product capabilities through internal growth,
Accountants on Accounting and strategic bank and non-bank acquisitions and equity
Financial Disclosure. 212 investments, and the formation of various non-banking
Item 9A Controls and Procedures. 212
Item 9B Other Information. 212 subsidiaries.
PART III PENDING ACQUISITION OF RBC BANK (USA)
Item 10 Directors, Executive Officers and On June 19, 2011, we entered into a definitive agreement with
Corporate Governance. 212 Royal Bank of Canada and RBC USA Holdco Corporation to
Item 11 Executive Compensation. 213
Item 12 Security Ownership of Certain Beneficial acquire RBC Bank (USA), the US retail banking subsidiary of
Owners and Management and Related Royal Bank of Canada, for $3.45 billion. The purchase price is
Stockholder Matters. 213 subject to certain adjustments, including adjustments based on
Item 13 Certain Relationships and Related the closing date tangible net asset value of RBC Bank (USA),
Transactions, and Director as defined in the definitive agreement. RBC Bank (USA) has
Independence. 215
Item 14 Principal Accounting Fees and Services. 215 approximately $25 billion in proforma assets as reflected in
the definitive agreement to be included in the transaction and
PART IV
Item 15 Exhibits, Financial Statement Schedules. 215 more than 400 branches in North Carolina, Florida, Alabama,
SIGNATURES 216 Georgia, Virginia and South Carolina. The transaction is
EXHIBIT INDEX E-1 expected to close in March 2012, subject to remaining
customary closing conditions.
PART I
Forward-Looking Statements: From time to time, The PNC FLAGSTAR BRANCH ACQUISITION
Financial Services Group, Inc. (PNC or the Corporation) has Effective December 9, 2011, PNC acquired 27 branches in the
made and may continue to make written or oral forward- northern metropolitan Atlanta, Georgia area from Flagstar
looking statements regarding our outlook for earnings, Bank, FSB, a subsidiary of Flagstar Bancorp, Inc. We
revenues, expenses, capital levels and ratios, liquidity levels, assumed approximately $210 million of deposits associated
asset levels, asset quality and other matters regarding or with these branches. No loans were acquired in the
affecting PNC and its future business and operations or the transaction.
impact of legal, regulatory or supervisory matters on our
business operations or performance. This Annual Report on BANKATLANTIC BRANCH ACQUISITION
Form 10-K (the Report or Form 10-K) also includes forward- Effective June 6, 2011, PNC acquired 19 branches in the
looking statements. With respect to all such forward-looking greater Tampa, Florida area from BankAtlantic, a subsidiary
statements, you should review our Risk Factors discussion in of BankAtlantic Bancorp, Inc. We assumed approximately
Item 1A, our Risk Management, Critical Accounting Estimates $324 million of deposits associated with these branches. No
And Judgments, and Cautionary Statement Regarding loans were acquired in the transaction.
Forward-Looking Information sections included in Item 7, and
Note 22 Legal Proceedings and Note 23 Commitments and REVIEW OF BUSINESS SEGMENTS
Guarantees in the Notes To Consolidated Financial In addition to the following information relating to our lines of
Statements included in Item 8 of this Report. business, we incorporate the information under the captions

2 The PNC Financial Services Group, Inc. Form 10-K

Business Segment Highlights, Product Revenue, and Business
Segments Review in Item 7 of this Report here by reference.
Also, we include the financial and other information by
business in Note 25 Segment Reporting in the Notes To
Consolidated Financial Statements in Item 8 of this Report
here by reference.
Assets, revenue and earnings attributable to foreign activities
were not material in the periods presented. Business segment
results for periods prior to 2011 have been reclassified to
reflect current methodologies and current business and
management structure and to present those periods on the
same basis. Business segment information does not include
PNC Global Investment Servicing Inc. (GIS). Results of
operations of GIS through June 30, 2010 and the related
after-tax gain on its sale in the third quarter of 2010 are
reflected in discontinued operations.
Retail Banking provides deposit, lending, brokerage,
investment management, and cash management services to
consumer and small business customers within our primary
geographic markets. Our customers are serviced through our
branch network, call centers and online banking channels. The
branch network is principally located in our primary
geographical markets.
Our core strategy is to acquire and retain customers who
maintain their primary checking and transaction relationships
with PNC. We also seek revenue growth by deepening our
share of our customers financial assets, including savings and
liquidity deposits, loans and investable assets. A key element
of our strategy is to expand the use of lower-cost alternative
distribution channels while continuing to optimize the
traditional branch network. In addition, we have a disciplined
process to continually improve the engagement of both our
employees and customers, which is a strong indicator of
customer growth, retention and relationship expansion.
Corporate & Institutional Banking provides lending, treasury
management, and capital markets-related products and
services to mid-sized corporations, government and
not-for-profit entities, and selectively to large corporations.
Lending products include secured and unsecured loans, letters
of credit and equipment leases. Treasury management services
include cash and investment management, receivables
management, disbursement services, funds transfer services,
information reporting, and global trade services. Capital
markets-related products and services include foreign
exchange, derivatives, loan syndications, mergers and
acquisitions advisory and related services to middle-market
companies, our multi-seller conduit, securities underwriting,
and securities sales and trading. Corporate & Institutional
Banking also provides commercial loan servicing, and real
estate advisory and technology solutions for the commercial
real estate finance industry. Corporate & Institutional Banking
provides products and services generally within our primary
geographic markets, with certain products and services offered
nationally and internationally.
Corporate & Institutional Banking is focused on becoming a
premier provider of financial services in each of the markets it
serves. The value proposition to its customers is driven by
providing a broad range of competitive and high quality
products and services by a team fully committed to delivering
the comprehensive resources of PNC to help each client
succeed. Corporate & Institutional Bankings primary goals
are to achieve market share growth and enhanced returns by
means of expansion and retention of customer relationships
and prudent risk and expense management.
Asset Management Group includes personal wealth
management for high net worth and ultra high net worth
clients and institutional asset management. Wealth
management products and services include financial and
retirement planning, customized investment management,
private banking, tailored credit solutions and trust
management and administration for individuals and their
families. Institutional asset management provides investment
management, custody, and retirement planning services. The
institutional clients include corporations, unions,
municipalities, non-profits, foundations and endowments
located primarily in our geographic footprint.
Asset Management Group is focused on being one of the
premier bank-held individual and institutional asset managers
in each of the markets it serves. The business seeks to deliver
high quality advice and investment management to our high
net worth, ultra high net worth and institutional client sectors
through a broad array of products and services. Asset
Management Groups primary goals are to service its clients,
grow its business and deliver solid financial performance with
prudent risk and expense management.
Residential Mortgage Banking directly originates primarily
first lien residential mortgage loans on a nationwide basis with
a significant presence within the retail banking footprint, and
also originates loans through majority owned affiliates.
Mortgage loans represent loans collateralized by one-to-four-
family residential real estate. These loans are typically
underwritten to government agency and/or third-party
standards, and sold, servicing retained, to secondary mortgage
conduits Federal National Mortgage Association (FNMA),
Federal Home Loan Mortgage Corporation (FHLMC), Federal
Home Loan Banks and third-party investors, or are securitized
and issued under the Government National Mortgage
Association (GNMA) program, as described in more detail in
Note 3 Loan Sale and Servicing Activities and Variable
Interest Entities in Item 8 of this Report and included here by
reference. The mortgage servicing operation performs all
functions related to servicing mortgage loans primarily those
in first lien position for various investors and for loans
owned by PNC. Certain loans originated through majority
owned affiliates are sold to others.
Residential Mortgage Banking is focused on adding value to
the PNC franchise by building stronger customer
relationships, providing quality investment loans, and
The PNC Financial Services Group, Inc. Form 10-K 3
delivering acceptable returns under a moderate risk profile.
Our national distribution capability provides volume that
drives economies of scale, risk dispersion, and cost-effective
extension of the retail banking footprint for cross-selling
opportunities.
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
The following statistical information is included on the
indicated pages of this Report and is incorporated herein by
reference:
Form 10-K page

BlackRock is a leader in investment management, risk Average Consolidated Balance Sheet

management and advisory services for institutional and retail And Net Interest Analysis 208
clients worldwide. BlackRock provides diversified investment Analysis Of Year-To-Year Changes
management services to institutional clients, intermediary and In Net Interest Income 207
individual investors through various investment vehicles. Book Values Of Securities 41 44
Investment management services primarily consist of the and 142 148
management of equity, fixed income, multi-asset class, Maturities And Weighted-Average
alternative investment and cash management products. Yield Of Securities 147
BlackRock offers its investment products in a variety of Loan Types 38 40
vehicles, including open-end and closed-end mutual funds, 127 and 209
iShares exchange-traded funds (ETFs), collective Selected Loan Maturities And
investment trusts and separate accounts. In addition, Interest Sensitivity 211
BlackRock provides market risk management, financial Nonaccrual, Past Due And 73 81
markets advisory and enterprise investment system services to Restructured Loans And Other 113 114
a broad base of clients. Financial markets advisory services Nonperforming Assets 127 136 and 209 210
include valuation services relating to illiquid securities, Potential Problem Loans And Loans
dispositions and workout assignments (including long-term Held For Sale 45 and 74 83
portfolio liquidation assignments), risk management and Summary Of Loan Loss Experience 81 83, 127 140
strategic planning and execution. and 210
Assignment Of Allowance For Loan
And Lease Losses 81 83 and 211
We hold an equity investment in BlackRock. Our investment
in BlackRock is a key component of our diversified revenue Average Amount And Average Rate
Paid On Deposits 208
strategy. BlackRocks ability to increase revenue, earnings
and shareholder value over time is predicated on its ability to Time Deposits Of $100,000 Or More 162 and 211
generate new business in investment management and Selected Consolidated Financial
BlackRock Solutions products and services. New business Data 27 28
efforts are dependent on BlackRocks ability to achieve Short-term borrowings not
clients investment objectives in a manner consistent with included as average balances
during 2011, 2010 and 2009 were
their risk preferences and to deliver excellent client service.
less than 30% of total
All of these efforts require the commitment and contributions shareholders equity at the end of
of BlackRock employees. Accordingly, the ability to attract each period.
and retain talented professionals is critical to BlackRocks
long-term success.

Non-Strategic Assets Portfolio (formerly, Distressed Assets

Portfolio) includes commercial residential development loans,
cross-border leases, consumer brokered home equity loans,
retail mortgages, non-prime mortgages, and residential
construction loans. We obtained the majority of these
non-strategic assets through acquisitions of other companies,
and they fall outside of our core business strategy.

SUBSIDIARIES
Our corporate legal structure at December 31, 2011 consisted
of one domestic subsidiary bank, including its subsidiaries,
and approximately 122 active non-bank subsidiaries. Our bank
subsidiary is PNC Bank, National Association (PNC Bank,
N.A.), headquartered in Pittsburgh, Pennsylvania. For
additional information on our subsidiaries, see Exhibit 21 to
this Report.

4 The PNC Financial Services Group, Inc. Form 10-K

EUROPEAN EXPOSURE
As of December 31, 2011, our loans, leases, securities,
derivatives, letters of credit, unfunded contractual
commitments and other direct financial exposure (exposure)
with European entities totaled $2.1 billion of which $1.6 billion
or .59% of our total assets represent outstanding balances.
European entities are defined as supranational, sovereign,
financial institutions and non-financial entities within the
countries that comprise the European Union, European Union
candidate countries and other European countries. Of the $2.1
billion in direct financial exposure, $357 million are securities
issued by AAA-rated sovereigns, $625 million represents
cross-border leases in support of national infrastructure and
supported by letters of credit having trigger mechanisms that
require collateral in the form of cash or United States Treasury
securities, and $440 million of unfunded contractual
commitments primarily to United Kingdom local office
commitments for Business Credit corporate customers on a
secured basis. There was no individual country where the
exposure was greater than .75% of total assets.
We also track other European financial exposures where PNC
is appointed as a fronting bank by our clients and we elect to
assume the joint probability of default risk. For PNC to incur a
loss in these types of indirect exposures, the obligor and the
financial counterparty participating bank would need to
default. As of December 31, 2011, PNC had $2.0 billion of
indirect exposure where PNC is the fronting bank.
Foreign exposure underwriting and approvals are centralized.
Country exposures are monitored and reported on a regular
basis. We actively monitor sovereign risk, banking system
health, and market conditions and adjust limits as appropriate.
We rely on information from internal and external sources
including international financial institutions, economists and
analysts, industry trade organizations, rating agencies,
econometric data analytical service providers, and geopolitical
news analysis services.
Among the regions and nations that PNC monitors, we have
identified eight countries for which we are more closely
monitoring their economic and financial situation. The basis
for the increased monitoring includes, but is not limited to,
sovereign debt burden, near term financing risk, political
instability, GDP trends, balance of payments, market
confidence, banking system distress and/or holdings of
stressed sovereign debt. The countries identified are: Greece,
Ireland, Italy, Portugal, Spain (collectively GIIPS),
Belgium, France and Turkey. Direct and indirect exposure to
entities in the GIIPS countries totaled $181 million as of
December 31, 2011 of which $118 million is direct exposure
in the form of cross-border leases within Portugal and indirect
exposure primarily composed of $48 million from letters of
credit with strong underlying obligors and $15 million of
unfunded commitments to Spain. Direct and indirect exposure
to entities in Belgium, France, and Turkey totaled $924
million as of December 31, 2011 of which, there is direct
exposure of $75 million in the form of cross-border leases
within Belgium, and $11 million of 90% Overseas Private
Investment Corporation (OPIC) guaranteed Turkish loans
and indirect exposure primarily composed of $770 million in
letters of credit with strong underlying obligors in France and
Belgium.
SUPERVISION AND REGULATION
OVERVIEW
PNC is a bank holding company registered under the Bank
Holding Company Act of 1956, as amended (BHC Act) and a
financial holding company under the Gramm-Leach-Bliley
Act (GLB Act).
We are subject to numerous governmental regulations, some
of which are highlighted below. You should also read Note 21
Regulatory Matters in the Notes To Consolidated Financial
Statements in Item 8 of this Report, included here by
reference, for additional information regarding our regulatory
matters. Applicable laws and regulations restrict our
permissible activities and investments and require compliance
with protections for loan, deposit, brokerage, fiduciary,
investment management and other customers, among other
things. They also restrict our ability to repurchase stock or pay
dividends, or to receive dividends from bank subsidiaries, and
impose capital adequacy requirements. The consequences of
noncompliance can include substantial monetary and
nonmonetary sanctions.
In addition, we are subject to comprehensive examination and
supervision by, among other regulatory bodies, the Board of
Governors of the Federal Reserve System (Federal Reserve)
and the Office of the Comptroller of the Currency (OCC),
which results in examination reports and ratings (which are
not publicly available) that can impact the conduct and growth
of our businesses. These examinations consider not only
compliance with applicable laws and regulations, but also
capital levels, asset quality and risk, management ability and
performance, earnings, liquidity, and various other factors.
The results of examination activity by any of our federal bank
regulators potentially can result in the imposition of
significant limitations on our activities and growth. These
regulatory agencies generally have broad discretion to impose
restrictions and limitations on the operations of a regulated
entity where the relevant agency determines, among other
things, that such operations are conducted in an unsafe or
unsound manner, fail to comply with applicable law or are
otherwise inconsistent with the regulations or supervisory
policies of the agency. This supervisory framework could
materially impact the conduct, growth and profitability of our
operations.
We also are subject to regulation by the Securities and
Exchange Commission (SEC) by virtue of our status as a
public company and by the SEC and the Commodity Futures
Trading Commission (CFTC) due to the nature of some of our
businesses. Our banking and securities businesses with
operations outside the United States, including those
conducted by BlackRock, are also subject to regulation by
The PNC Financial Services Group, Inc. Form 10-K 5
appropriate authorities in the foreign jurisdictions in which
they do business.
Effective as of July 21, 2011, the Consumer Financial
Protection Bureau (CFPB), a new agency established by the
Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank), assumed responsibility for examining PNC
Bank, N.A. and its affiliates (including PNC) for compliance
with consumer financial protection laws and enforcing such
laws with respect to PNC Bank, N.A. and its affiliates. This
authority previously was exercised by the OCC and Federal
Reserve. Starting July 21, 2011, the CFPB also assumed
authority for prescribing rules governing the provision of
consumer financial products and services such as credit cards,
student and other loans, deposits and residential mortgages.
After this date, the subsidiaries of PNC Bank, N.A. are
generally subject to state consumer protection laws.
Additionally, new provisions concerning the applicability of
state consumer protection laws to national banks became
effective on July 21, 2011. Questions may arise as to whether
certain state consumer financial laws may be preempted with
respect to PNC Bank, N.A. after this date. We expect to
experience an increase in regulation of our retail banking
business and additional compliance obligations, revenue and
costs impacts.
As a regulated financial services firm, our relationships and
good standing with regulators are of fundamental importance
to the operation and growth of our businesses. The Federal
Reserve, OCC, SEC, and other domestic and foreign
regulators have broad enforcement powers, and powers to
approve, deny, or refuse to act upon our applications or
notices to conduct new activities, acquire or divest businesses
or assets and deposits, or reconfigure existing operations.
Dodd-Frank provides the CFPB with broad enforcement
powers over PNC Bank, N.A. and its affiliates with respect to
compliance with consumer financial protection laws. The
CFPB also has the ability to issue rules that affect a wide
range of the consumer financial products and services that we
provide.
We anticipate new legislative and regulatory initiatives over
the next several years, focused specifically on banking and
other financial services in which we are engaged. These
initiatives would be in addition to the actions already taken by
Congress and the regulators, including the Emergency
Economic Stabilization Act of 2008 (EESA), the American
Recovery and Reinvestment Act of 2009 (Recovery Act), the
Credit Card Accountability Responsibility and Disclosure Act
of 2009 (Credit CARD Act), the Secure and Fair Enforcement
for Mortgage Licensing Act (the SAFE Act), and Dodd-Frank,
as well as changes to the regulations implementing the Real
Estate Settlement Procedures Act, the Federal Truth in
Lending Act, and the Electronic Fund Transfer Act, including
the new rules set forth in Regulation E related to overdraft
charges.
6 The PNC Financial Services Group, Inc. Form 10-K
Dodd-Frank, which was signed into law on July 21, 2010,
comprehensively reforms the regulation of financial
institutions, products and services. Dodd-Frank requires
various federal regulatory agencies to implement numerous
rules and regulations. Because the federal agencies are granted
broad discretion in drafting these rules and regulations, and
many implementing rules either have not yet been issued or
have only been issued in proposed form, many of the details
and much of the impact of Dodd-Frank may not be known for
many months or years. Among other things, Dodd-Frank
provides for new capital standards that eliminate the treatment
of trust preferred securities as Tier 1 regulatory capital;
requires that deposit insurance assessments be calculated
based on an insured depository institutions assets rather than
its insured deposits, and raises the minimum Designated
Reserve Ratio (the balance in the Deposit Insurance Fund
divided by estimated insured deposits) to 1.35%; establishes a
comprehensive regulatory regime for the derivatives activities
of financial institutions; limits proprietary trading and owning
or sponsoring hedge funds and private equity funds by
banking entities; requires the Federal Reserve to establish a
variety of enhanced prudential standards for bank holding
companies with $50 billion or more in total assets; places
limitations on the interchange fees we can charge for debit
card transactions; and establishes new minimum mortgage
underwriting standards for residential mortgages.
Legislative and regulatory developments to date, as well as
those that come in the future, have had and are likely to
continue to have an impact on the conduct of our business.
The more detailed description of the significant regulations to
which we are subject included in this Report is based on the
current regulatory environment and is subject to potentially
material change. See also the additional information included
in Item 1A of this Report under the risk factors discussing the
impact of financial regulatory reform initiatives, including
Dodd-Frank and regulations promulgated to implement it, on
the regulatory environment for the financial services industry.
Among other areas that have been receiving a high level of
regulatory focus over the last several years are compliance
with anti-money laundering laws and the protection of
confidential customer information. In addition, at least in part
driven by the current economic and financial situation, there is
an increased focus on fair lending and other issues related to
the mortgage industry. Ongoing mortgage-related regulatory
reforms include measures aimed at reducing mortgage
foreclosures.
Additional legislation, changes in rules promulgated by the
Federal Reserve, the OCC, the Federal Deposit Insurance
Corporation (FDIC), the CFPB, the SEC, the CFTC, other
federal and state regulatory authorities and self-regulatory
organizations, or changes in the interpretation or enforcement
of existing laws and rules may directly affect the method of
operation and profitability of our businesses. The profitability
of our businesses could also be affected by rules and
regulations that impact the business and financial communities
in general, including changes to the laws governing taxation,
antitrust regulation and electronic commerce.
There are numerous rules governing the regulation of financial
services institutions and their holding companies.
Accordingly, the following discussion is general in nature and
does not purport to be complete or to describe all of the laws
and regulations that apply to us. To a substantial extent, the
purpose of the regulation and supervision of financial services
institutions and their holding companies is not to protect our
shareholders and our non-customer creditors, but rather to
protect our customers (including depositors) and the financial
markets in general.
BANKING REGULATION AND SUPERVISION
On November 22, 2011, the Federal Reserve adopted a final
rule implementing an annual capital plan review process for
domestic bank holding companies (BHCs) that have $50 billion
or more in total consolidated assets. In addition, on that date,
the Federal Reserve launched its annual review process,
referred to as the Comprehensive Capital Analysis and Review
(CCAR), for 2012. In connection with the 2012 CCAR, and as
part of the annual capital planning process in future years, the
Federal Reserve will undertake a supervisory assessment of the
capital adequacy of the BHCs, including PNC, that have $50
billion or more in total consolidated assets. This capital
adequacy assessment will be based on a review of a
comprehensive capital plan submitted by each participating
BHC to the Federal Reserve. In connection with the 2012
CCAR, PNC filed its capital plan with the Federal Reserve on
January 9, 2012.
The Federal Reserve will evaluate PNCs capital plan based
on PNCs risk profile and the strength of PNCs internal
capital assessment process under the regulatory capital
standards currently applicable and in accordance with PNCs
plans to address proposed revisions to the regulatory capital
framework developed by the Basel Committee on Banking
Supervision (Basel III) and as set forth in relevant provisions
of Dodd-Frank. The Federal Reserves evaluation will take
into consideration any capital distribution plans, such as plans
to pay or increase common stock dividends or to reinstate or
increase common stock repurchase programs. In conducting
this analysis, the Federal Reserve will consider the projected
capital adequacy and performance of PNC under base case
and adverse economic scenarios developed by both PNC and
the Federal Reserve. After completing its review, the Federal
Reserve may object or not object to the firms proposed
capital actions. The Federal Reserve has stated that, after
completion of the 2012 CCAR exercise, it expects to publish
the Federal Reserves estimates of certain capital, revenue and
loss information under the Federal Reserves own supervisory
stress scenario for each of the largest 19 BHCs participating in
the 2012 reviews, including PNC.
PNC expects to receive the Federal Reserves response (either
a non-objection or objection) to the capital plan submitted as
part of the 2012 CCAR by the end of the first quarter 2012.
The Basel III capital framework has yet to be finalized by the
Federal banking agencies and is therefore subject to further
change. Using managements assumptions relevant to
calculation of ratios under Basel III, PNC expects its proforma
Tier 1 common ratio under Basel III to reach about 8.0 to 8.5
percent during 2013. This estimate is based on available data
and information as of December 31, 2011 and on the phase-in
of Basel III rules. It also represents our assumptions and
interpretations regarding the Basel II advanced measurement
approaches regarding the calculation of risk-weighted assets
related to credit, operational and market risk. Both our Basel
II and Basel III estimates are point in time estimates and will
be subject to both further regulatory guidance and clarity, and
the refinement of internal estimates and methodologies.
As a result of Dodd-Frank, subsidiaries of PNC Bank, N.A.
will be subject to state law and regulation to the same extent
as if they were not subsidiaries of a national bank.
Additionally, based on Dodd-Frank, state authorities may
assert that certain state consumer financial laws that provide
different requirements or limitations than Federal law may
apply to national banks, including PNC Bank, N.A. Such state
laws may be preempted if they meet certain standards set forth
in Dodd-Frank or other applicable law.
Dodd-Frank established the 10-member inter-agency Financial
Stability Oversight Council (FSOC), which is charged with
identifying systemic risks and strengthening the regulation of
financial holding companies and certain non-bank companies
deemed to be systemically important and could, in
extraordinary cases and in conjunction with the Federal
Reserve, break up financial firms that are deemed to be too
big to fail. Dodd-Frank also requires the Federal Reserve to
establish prudential standards for bank holding companies
with total consolidated assets equal to or greater than $50
billion that are more stringent than the standards and
requirements applicable to bank holding companies with
assets below this threshold, and that increase in stringency for
bank holding companies that present heightened risk to the
financial system. Additional information concerning these
enhanced prudential standards is provided in Item 1A of this
Report. The FSOC may make recommendations to the Federal
Reserve concerning the establishment and refinement of these
prudential standards and reporting and disclosure
requirements.
Because of PNCs ownership interest in BlackRock,
BlackRock is subject to the supervision and regulation of the
Federal Reserve.
Parent Company Liquidity and Dividends. The principal
source of our liquidity at the parent company level is
The PNC Financial Services Group, Inc. Form 10-K 7
dividends from PNC Bank, N.A. PNC Bank, N.A. is subject to
various federal restrictions on its ability to pay dividends to
PNC Bancorp, Inc., its direct parent. PNC Bank, N.A. is also
subject to federal laws limiting extensions of credit to its
parent holding company and non-bank affiliates as discussed
in Note 21 Regulatory Matters in the Notes To Consolidated
Financial Statements in Item 8 of this Report, which is
incorporated herein by reference. Further information on bank
level liquidity and parent company liquidity and on certain
contractual restrictions is also available in Liquidity Risk
Management in the Risk Management section and Trust
Preferred Securities in the Off-Balance Sheet Arrangements
and VIEs section of Item 7 of this Report, and in Note 13
Capital Securities of Subsidiary Trusts and Perpetual Trust
Securities in the Notes To Consolidated Financial Statements
in Item 8 of this Report.
Under Federal Reserve policy, a bank holding company is
expected to serve as a source of financial strength to its
subsidiary banks and to commit resources to support such
banks. Consistent with the source of strength policy for
subsidiary banks, the Federal Reserve has stated that, as a
matter of prudent banking, a bank holding company generally
should not maintain a rate of cash dividends unless its net
income available to common shareholders has been sufficient
to fully fund the dividends and the prospective rate of earnings
retention appears to be consistent with the corporations
capital needs, asset quality and overall financial condition.
Further, in providing guidance to the large BHCs participating
in the 2012 CCAR, discussed above, the Federal Reserve
stated that it expects plans submitted in 2012 will reflect
conservative dividend payout ratios and net share repurchase
programs, and that requests that imply common dividend
payout ratios above 30% of projected after-tax net income
available to common shareholders will receive particularly
close scrutiny. The Federal Reserve stated that it expects
BHCs that meet the minimum capital ratio requirements under
Basel III during the transition periods provided by Basel III,
but that do not meet the fully-phased in Basel III ratio of 7
percent Tier 1 common equity (plus any applicable capital
surcharge for globally systemically important banks), to
maintain prudent earnings retention policies with a view to
meeting the fully-phased in requirement as soon as reasonably
possible.
Additional Powers Under the GLB Act. The Gramm Leach
Bliley Act (GLB Act) permits a qualifying bank holding
company to become a financial holding company and
thereby engage in, or affiliate with financial companies
engaging in, a broader range of activities than would
otherwise be permitted for a bank holding company. Permitted
affiliates include securities underwriters and dealers, insurance
companies and companies engaged in other activities that are
determined by the Federal Reserve, in consultation with the
Secretary of the Treasury, to be financial in nature or
incidental thereto or are determined by the Federal Reserve
8 The PNC Financial Services Group, Inc. Form 10-K
unilaterally to be complementary to financial activities. We
became a financial holding company as of March 13, 2000. In
order to be and remain a financial holding company, a bank
holding company and its subsidiary depository institutions
must be well capitalized and well managed. In addition, a
financial holding company generally may not engage in a new
financial activity if any of its insured depository institutions
received a less than Satisfactory rating at its most recent
evaluation under the Community Reinvestment Act (CRA).
The Federal Reserve is the umbrella regulator of a financial
holding company, with its operating entities, such as its
subsidiary broker-dealers, investment managers, investment
companies, insurance companies and banks, also subject to the
jurisdiction of various federal and state functional regulators
with normal regulatory responsibility for companies in their
lines of business.
As subsidiaries of a financial holding company under the GLB
Act, our non-bank subsidiaries are generally allowed to
conduct new financial activities, and PNC is generally
permitted to acquire non-bank financial companies that have
less than $10 billion in assets, with after-the-fact notice to the
Federal Reserve. In addition, our non-bank subsidiaries (and
any financial subsidiaries of subsidiary banks) are permitted to
engage in certain activities that were not permitted for bank
holding companies and banks prior to enactment of the GLB
Act, and to engage on less restrictive terms in certain activities
that were previously permitted. Among other activities, we
currently rely on our status as a financial holding company to
conduct merchant banking activities and securities
underwriting and dealing activities. In addition, the GLB Act
permits national banks, such as PNC Bank, N.A., to engage in
expanded activities through the formation of a financial
subsidiary. PNC Bank, N.A. has filed a financial subsidiary
certification with the OCC and currently engages in insurance
agency activities through financial subsidiaries. PNC Bank,
N.A. may also generally engage through a financial subsidiary
in any activity that is financial in nature or incidental to a
financial activity. Certain activities, however, are
impermissible for a financial subsidiary of a national bank,
including insurance underwriting, insurance company
investment activities, real estate investment or development,
and merchant banking.
Other Federal Reserve and OCC Regulation and Supervision.
The federal banking agencies possess broad powers to take
corrective action as deemed appropriate for an insured
depository institution and its holding company. In some cases,
the extent of these powers depends upon whether the
institution in question is considered well capitalized,
adequately capitalized, undercapitalized, significantly
undercapitalized or critically undercapitalized. Generally,
the smaller an institutions capital base in relation to its risk-
weighted or total assets, the greater the scope and severity of
the agencies powers, ultimately permitting the agencies to
appoint a receiver for the institution. Business activities may
also be influenced by an institutions capital classification. For
instance, only a well capitalized depository institution may
accept brokered deposits without prior regulatory approval
and an adequately capitalized depository institution may
accept brokered deposits only with prior regulatory approval.
At December 31, 2011, PNC Bank, N.A. exceeded the
required ratios for classification as well capitalized. For
additional discussion of capital adequacy requirements, we
refer you to Funding and Capital Sources in the
Consolidated Balance Sheet Review section of Item 7 of this
Report and to Note 21 Regulatory Matters in the Notes To
Consolidated Financial Statements in Item 8 of this Report.
Laws and regulations limit the scope of our permitted
activities and investments. In addition to the activities that
would be permitted to be conducted by a financial subsidiary,
national banks (such as PNC Bank, N.A.) and their operating
subsidiaries may engage in any activities that are determined
by the OCC to be part of or incidental to the business of
banking.
Moreover, examination ratings of 3 or lower, lower capital
ratios than peer group institutions, regulatory concerns
regarding management, controls, assets, operations or other
factors, can all potentially result in practical limitations on the
ability of a bank or bank holding company to engage in new
activities, grow, acquire new businesses, repurchase its stock
or pay dividends, or to continue to conduct existing activities.
The Federal Reserves prior approval is required whenever we
propose to acquire all or substantially all of the assets of any
bank or thrift, to acquire direct or indirect ownership or
control of more than 5% of any class of voting shares of any
bank or thrift, or to merge or consolidate with any other bank
holding company or thrift holding company. The BHC Act
enumerates the factors the Federal Reserve Board must
consider when reviewing the merger of bank holding
companies or the acquisition of banks. These factors include
the competitive effects of the proposal in the relevant
geographic markets; the financial and managerial resources
and future prospects of the companies and banks involved in
the transaction; the effect of the transaction on financial
stability; the organizations compliance with anti-money
laundering laws and regulations; the convenience and needs of
the communities to be served; and the records of performance
under the CRA of the insured depository institutions involved
in the transaction. In cases involving interstate bank
acquisitions, the Board also must consider the concentration of
deposits nationwide and in certain individual states. OCC
prior approval is required for PNC Bank, N.A. to acquire
another insured bank or thrift by merger. In deciding whether
to approve such a transaction, the OCC is required to consider
factors similar to those that must be considered by the Federal
Reserve. Our ability to grow through acquisitions could be
limited by these approval requirements.
At December 31, 2011, PNC Bank, N.A. was rated
Outstanding with respect to CRA.
FDIC Insurance. PNC Bank, N.A. is insured by the FDIC and
subject to premium assessments. Regulatory matters could
increase the cost of FDIC deposit insurance premiums to an
insured bank as FDIC deposit insurance premiums are risk
based. Therefore, higher fee percentages would be charged to
banks that have lower capital ratios or higher risk profiles.
These risk profiles take into account weaknesses that are
found by the primary banking regulator through its
examination and supervision of the bank. A negative
evaluation by the FDIC or a banks primary federal banking
regulator could increase the costs to a bank and result in an
aggregate cost of deposit funds higher than that of competing
banks in a lower risk category. Under Dodd-Frank, in April
2011, the deposit insurance base calculation shifted from
deposits to average assets less Tier 1 capital. This
methodology change did not materially impact the premiums
due to the FDIC.
CFPB Regulation and Supervision. The Dodd-Frank Act gives
the CFPB authority to examine PNC and PNC Bank, N.A. for
compliance with a broad range of federal consumer financial
laws and regulations, including the laws and regulations that
relate to credit card, deposit, mortgage and other consumer
financial products and services we offer. In addition, Dodd-
Frank gives the CFPB broad authority to take corrective action
against PNC Bank, N.A. and PNC as it deems appropriate.
The CFPB also has powers that it was assigned in Dodd-Frank
to issue regulations and take enforcement actions to prevent
and remedy acts and practices relating to consumer financial
products and services that it deems to be unfair, deceptive or
abusive. The agency also has authority to impose new
disclosure requirements for any consumer financial product or
service. These authorities are in addition to the authority the
CFPB assumed on July 21, 2011 under existing consumer
financial law governing the provision of consumer financial
products and services.
SECURITIES AND DERIVATIVES REGULATION
The SEC is the functional regulator of our registered broker-
dealer and investment advisor subsidiaries. The registered
broker-dealer subsidiaries are also subject to rules and
regulations promulgated by the Financial Industry Regulatory
Authority (FINRA), among others.
Several of our subsidiaries are registered with the SEC as
investment advisers and provide services to clients, other PNC
affiliates and related entities, including registered investment
companies. Under rules adopted under Dodd-Frank, we have
been required to register additional subsidiaries as investment
advisors to private equity funds. Broker-dealer subsidiaries are
subject to the requirements of the Securities Exchange Act of
1934, as amended, and the regulations thereunder. Investment
advisor subsidiaries are subject to the requirements of the
Investment Advisers Act of 1940, as amended, and the
The PNC Financial Services Group, Inc. Form 10-K 9
regulations thereunder. An investment advisor to registered
investment companies is also subject to the requirements of
the Investment Company Act of 1940, as amended, and the
regulations thereunder.
Our broker-dealer and investment advisory subsidiaries also
may be subject to state securities laws and regulations. Over
the past several years, the SEC and other governmental
agencies have been focused on the mutual fund, hedge fund
and broker-dealer industries. Congress and the SEC have
adopted regulatory reforms and are continuing additional
reforms that have increased, and are likely to continue to
increase, the extent of regulation of the mutual fund, hedge
fund and broker-dealer industries and impose additional
compliance obligations and costs on our subsidiaries involved
with those industries.
Under provisions of the federal securities laws applicable to
broker-dealers, investment advisers and registered investment
companies and their service providers, a determination by a
court or regulatory agency that certain violations have
occurred at a company or its affiliates can result in fines,
restitution, a limitation on permitted activities, disqualification
to continue to conduct certain activities and an inability to rely
on certain favorable exemptions. Certain types of infractions
and violations can also affect a public company in its timing
and ability to expeditiously issue new securities into the
capital markets. In addition, certain changes in the activities of
a broker-dealer require approval from FINRA, and FINRA
takes into account a variety of considerations in acting upon
applications for such approval, including internal controls,
capital levels, management experience and quality, prior
enforcement and disciplinary history and supervisory
concerns.
BlackRock has subsidiaries in securities and related
businesses subject to SEC and FINRA regulation, as described
above, and a federally chartered nondepository trust company
subsidiary subject to supervision and regulation by the OCC.
For additional information about the regulation of BlackRock,
we refer you to the discussion under the Regulation section
of Item 1 Business in BlackRocks most recent Annual Report
on Form 10-K, which may be obtained electronically at the
SECs website at www.sec.gov.
In addition, Title VII of Dodd-Frank subjects virtually all
derivative transactions (swaps) to regulation by either the
CFTC (in the case of non security-based swaps) or the SEC
(in the case of security-based swaps). This legislation was
enacted, among other reasons, to reduce systemic risk,
increase transparency, and promote market integrity within the
financial system by, among other things: (i) providing for the
registration and comprehensive regulation of swap dealers
(SDs) and major swap participants (MSPs); (ii) imposing
mandatory clearing and trade execution requirements on all
standardized swaps, with certain limited exemptions;
(iii) creating robust recordkeeping and real-time public data
10 The PNC Financial Services Group, Inc. Form 10-K
reporting regimes with respect to swaps; (iv) imposing capital
and margin requirements on SDs and MSPs; (v) imposing
business conduct requirements on SDs and MSPs in their
dealings with counterparties; and (vi) enhancing the CFTCs
and SECs rulemaking and enforcement authorities with
respect to SDs and MSPs. Under the rules anticipated under
Dodd-Frank, we expect one or more of our subsidiaries to
register with the CFTC as a SD for interest rate and foreign
exchange swaps and accordingly be subject to all of the new
regulations and requirements imposed on a SD with respect to
these types of swaps.
COMPETITION
We are subject to intense competition from various financial
institutions and from non-bank entities that can offer a number
of similar products and services without being subject to bank
regulatory supervision and restrictions.
In making loans, PNC Bank, N.A. competes with traditional
banking institutions as well as consumer finance companies,
leasing companies and other non-bank lenders, and
institutional investors including collateralized loan obligation
(CLO) managers, hedge funds, mutual fund complexes and
private equity firms. Loan pricing, structure and credit
standards are extremely important in the current environment
as we seek to achieve appropriate risk-adjusted returns.
Traditional deposit-taking activities are also subject to pricing
pressures and to customer migration as a result of intense
competition for consumer investment dollars.
PNC Bank, N.A. competes for deposits with:
Other commercial banks,
Savings banks,
Savings and loan associations,
Credit unions,
Treasury management service companies,
Insurance companies, and
Issuers of commercial paper and other securities,
including mutual funds.
Our various non-bank businesses engaged in investment
banking and alternative investment activities compete with:
Commercial banks,
Investment banking firms,
Merchant banks,
Insurance companies,
Private equity firms, and
Other investment vehicles.
In providing asset management services, our businesses
compete with:
Investment management firms,
Large banks and other financial institutions,
Brokerage firms,
Mutual fund complexes, and
Insurance companies.
We include here by reference the additional information
regarding competition included in the Item 1A Risk Factors
section of this Report.
EMPLOYEES
Employees totaled 51,891 at December 31, 2011. This total
includes 45,940 full-time and 5,951 part-time employees.
SEC REPORTS AND CORPORATE GOVERNANCE
INFORMATION
We are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (Exchange Act),
and, in accordance with the Exchange Act, we file annual,
quarterly and current reports, proxy statements, and other
information with the SEC. Our SEC File Number is
001-09718. You may read and copy this information at the
SECs Public Reference Room located at 100 F Street NE,
Room 1580, Washington, D.C. 20549. You can obtain
information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330.
You can also obtain copies of this information by mail from
the Public Reference Section of the SEC, 100 F Street NE,
Washington, D.C. 20549, at prescribed rates.
The SEC also maintains an internet website that contains
reports, proxy and information statements, and other
information about issuers, like us, who file electronically with
the SEC. The address of that site is www.sec.gov. You can
also inspect reports, proxy statements and other information
about us at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
We also make our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to those reports filed or furnished to the SEC
pursuant to Section 13(a) or 15(d) of the Exchange Act
available free of charge on our internet website as soon as
reasonably practicable after we electronically file such material
with, or furnish it to, the SEC. PNCs corporate internet address
is www.pnc.com and you can find this information at
www.pnc.com/secfilings. Shareholders and bondholders may
also obtain copies of these filings without charge by contacting
Shareholder Services at 800-982-7652 or via the online contact
form at www.computershare.com/contactus for copies without
exhibits, and by contacting Shareholder Relations at
800-843-2206 or via e-mail at investor.relations@pnc.com for
copies of exhibits, including financial statement and schedule
exhibits where applicable. The interactive data file (XBRL)
exhibit is only available electronically.
Information about our Board of Directors and its committees and
corporate governance at PNC is available on PNCs corporate
website at www.pnc.com/corporategovernance. Our PNC Code
of Business Conduct and Ethics is available on our corporate
website at www.pnc.com/corporategovernance. In addition, any
future amendments to, or waivers from, a provision of the PNC
Code of Business Conduct and Ethics that applies to our directors
or executive officers (including the Chairman and Chief
Executive Officer, the Chief Financial Officer and the Controller)
will be posted at this internet address.
Shareholders who would like to request printed copies of the
PNC Code of Business Conduct and Ethics or our Corporate
Governance Guidelines or the charters of our Boards Audit,
Nominating and Governance, Personnel and Compensation, or
Risk Committees (all of which are posted on the PNC
corporate website) may do so by sending their requests to
George P. Long, III, Chief Governance Counsel and Corporate
Secretary, at corporate headquarters at One PNC Plaza, 249
Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707. Copies
will be provided without charge to shareholders.
Our common stock is listed on the New York Stock Exchange
(NYSE) under the symbol PNC.
INTERNET INFORMATION
The PNC Financial Services Group, Inc.s financial reports
and information about its products and services are available
on the internet at www.pnc.com. We provide information for
investors on our corporate website under About PNC
Investor Relations, such as Investor Events, Quarterly
Earnings, SEC Filings, Financial Information, Financial Press
Releases and Message from the Chairman. Under Investor
Relations, we will from time to time post information that we
believe may be important or useful to investors. We generally
post the following shortly before or promptly following its
first use or release: financially-related press releases
(including earnings releases), various SEC filings,
presentation materials associated with earnings and other
investor conference calls or events, and access to live and
taped audio from such calls or events. When warranted, we
will also use our website to expedite public access to time-
critical information regarding PNC in advance of distribution
of a press release or a filing with the SEC disclosing the same
information. You can also find the SEC reports and corporate
governance information described in the sections above in the
Investor Relations section of our website.
Where we have included web addresses in this Report, such as
our web address and the web address of the SEC, we have
included those web addresses as inactive textual references
only. Except as specifically incorporated by reference into this
Report, information on those websites is not part hereof.
ITEM 1A RISK FACTORS
We are subject to a number of risks potentially impacting our
business, financial condition, results of operations and cash
flows. As a financial services organization, certain elements of
risk are inherent in our transactions and are present in the
business decisions we make. Thus, we encounter risk as part
of the normal course of our business, and we design risk
management processes to help manage these risks.
The PNC Financial Services Group, Inc. Form 10-K 11
There are risks that are known to exist at the outset of a
transaction. For example, every loan transaction presents
credit risk (the risk that the borrower may not perform in
accordance with contractual terms) and market risk (a
potential loss in earnings or economic value due to adverse
movement in market interest rates or credit spreads), with the
nature and extent of these risks principally depending on the
financial profile of the borrower and overall economic
conditions. We focus on lending that is within the boundaries
of our risk framework, and manage these risks by adjusting
the terms and structure of the loans we make and through our
oversight of the borrower relationship, as well as through
management of our deposits and other funding sources.
Risk management is an important part of our business model.
The success of our business is dependent on our ability to
identify, understand and manage the risks presented by our
business activities so that we can appropriately balance
revenue generation and profitability. These risks include credit
risk, market risk, liquidity risk, operational risk, model risk,
compliance and legal risk, and strategic and reputation risk.
We discuss our principal risk management processes and, in
appropriate places, related historical performance in the Risk
Management section included in Item 7 of this Report.
The following are the key risk factors that affect us. Any one
or more of these risk factors could have a material adverse
impact on our business, financial condition, results of
operations or cash flows, in addition to presenting other
possible adverse consequences, which are described below.
These risk factors and other risks are also discussed further in
other sections of this Report.
The possibility of the moderate economic recovery
returning to recessionary conditions or of turmoil or
volatility in the financial markets would likely have an
adverse effect on our business, financial position and
results of operations.
Although the United States economy has shown modest
improvement recently, economic conditions continue to pose a
risk to financial institutions, including PNC. The economic
recovery, although continuing, did so at a slower pace in 2011
than previously anticipated. Job growth has not yet been
sufficient to significantly reduce high unemployment in the
United States. Consumer and business confidence remains low.
There continues to be concern regarding the possibility of a
return to recessionary conditions, as well as regarding the
possibility of increased turmoil or volatility in financial markets.
The global recession and disruption of the financial markets
has led to concerns over capital markets access and the
solvency of certain European Union member states, including
Greece, Portugal, Ireland, Italy and Spain, and of financial
institutions that have significant direct or indirect exposure to
debt issued by these countries. Certain of the major rating
agencies have downgraded the sovereign debt of Greece,
12 The PNC Financial Services Group, Inc. Form 10-K
Portugal and Ireland to below investment grade. The
sovereign debt of Italy and Spain were also downgraded.
These ratings downgrades and implementation of European
Union and private sector support programs have increased
concerns that other European Union member states could
experience similar financial troubles. A failure to adequately
address sovereign debt concerns in Europe could hamper
economic recovery or contribute to a return to recessionary
economic conditions and contribute to severe stress in the
financial markets, including in the United States.
On August 5, 2011, Standard & Poorss Rating Services
lowered its long term sovereign credit rating on the United
States of America from AAA to AA+. It is possible that the
downgrade and continued concerns about U.S. fiscal policy
and trajectory of the national debt of the U.S. could have
severe repercussions on the U.S. and global credit and
financial markets, further exacerbate concerns over sovereign
debt of other countries and could disrupt economic activity in
the U.S. and elsewhere.
Current economic conditions have had an adverse effect on
our business and financial performance and may not improve
in the near future. We expect these conditions to continue to
have an ongoing negative impact on us and a worsening of
conditions would likely aggravate the adverse effects of these
difficult economic and market conditions on us and on others
in the financial services industry.
In particular, we may face the following risks in connection
with the current economic and market environment:
Investors may have less confidence in the equity
markets in general and in financial services industry
stocks in particular, which could place downward
pressure on PNCs stock price and resulting market
valuation.
Economic and market developments, in the United
States, Europe or elsewhere, may further affect
consumer and business confidence levels and may
cause declines in credit usage and adverse changes in
payment patterns, causing increases in delinquencies
and default rates.
The continuation of the current very low interest rate
environment, which is expected to continue at least
through late 2014 based on statements by the
Chairman of the Federal Reserve Board, could affect
consumer and business behavior in ways that are
adverse to us and could also hamper our ability to
increase our net interest income.
Our ability to assess the creditworthiness of our
customers may be impaired if the models and
approaches we use to select, manage, and underwrite
our customers become less predictive of future
behaviors.
The process we use to estimate losses in our credit
exposures requires difficult, subjective, and complex
judgments, including with respect to economic
 conditions and how economic conditions might
impair the ability of our borrowers to repay their
loans. At any point in time or for any length of time,
such losses may no longer be capable of accurate
estimation, which may, in turn, adversely impact the
reliability of the process for estimating losses and,
therefore, the establishment of adequate reserves for
those losses.
We could suffer decreases in customer desire to do
business with us, whether as a result of a decreased
demand for loans or other financial products and
services or decreased deposits or other investments in
accounts with PNC.
Competition in our industry could intensify as a
result of the increasing consolidation of financial
services companies in connection with current market
conditions, or otherwise.
Increased regulation of compensation at financial
services companies as part of government efforts to
reform the industry may hinder our ability to attract,
retain and incentivize well-qualified individuals in
key positions.
Investors in mortgage loans and other assets that we
sell or sold are more likely to seek indemnification
from us against losses or otherwise seek to have us
share in such losses or to request us to repurchase loans
that they believe do not comply with applicable
representations and warranties or other contractual
provisions.
We may be subject to additional fees and taxes as the
government seeks to recover some of the costs of its
recovery efforts, reduce the national debt or pay for
additional government programs, in particular from
the financial services industry.
The regulatory environment for the financial services
industry is being significantly impacted by financial
regulatory reform initiatives in the United States and
elsewhere, including Dodd-Frank and regulations
promulgated to implement it.
The United States and other governments have undertaken
major reform of the regulatory oversight structure of the
financial services industry, including engaging in new efforts
to impose requirements designed to reduce systemic risks and
protect consumers and investors from financial abuse. We
expect to face further increased regulation of our industry as a
result of current and future initiatives intended to provide
economic stimulus, financial market stability and enhanced
regulation of financial services companies and to enhance the
liquidity and solvency of financial institutions and markets.
We also expect in many cases more intense scrutiny from our
bank supervisors in the examination process and more
aggressive enforcement of laws and regulations on both the
federal and state levels. Compliance with regulations and
other supervisory initiatives will likely increase our cost and
reduce our revenue, and may limit our ability to pursue certain
desirable business opportunities.
The Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank) mandates the most wide-ranging
overhaul of financial industry regulation in decades. Dodd-
Frank was signed into law on July 21, 2010. Many parts of the
law are now in effect and others are now in the
implementation stage, which is likely to continue for several
years. The law requires that regulators, some of which are new
regulatory bodies created by Dodd-Frank, draft, review and
approve more than 300 implementing regulations and conduct
numerous studies that are likely to lead to more regulations, a
process that, while well underway, is proceeding somewhat
slower than originally anticipated, thus extending the
uncertainty surrounding the ultimate impact of Dodd-Frank on
us. A number of reform provisions are likely to significantly
impact the ways in which banks and bank holding companies,
including PNC, do business.
Newly created regulatory bodies include the Consumer
Financial Protection Bureau (CFPB) and the Financial
Stability Oversight Council (FSOC). The CFPB has
been given authority to regulate consumer financial
products and services sold by banks and non-bank
companies and to supervise banks with assets of more
than $10 billion and their affiliates for compliance
with Federal consumer protection laws. The FSOC has
been charged with identifying systemic risks,
promoting stronger financial regulation and identifying
those non-bank companies that are systemically
important and thus should be subject to regulation by
the Federal Reserve. In addition, in extraordinary cases
and together with the Federal Reserve, the FSOC
could break up financial firms that are deemed to
present a grave threat to the financial stability of the
United States.
Dodd-Frank (through provisions commonly known
as the Volcker Rule) prohibits banks from
engaging in some types of proprietary trading and
restricts the ability of banks to sponsor, invest in or
have other financial relationships with private equity
or hedge funds. In October 2011, four of the five
agencies with authority for rulemaking issued
proposed rules to implement the Volcker Rule. In
January 2012, the fifth agency issued substantially
similar proposed rules. The rules set forth a complex
and detailed compliance, reporting and monitoring
program for large banks, and seek comments on
numerous questions. Comments are due in February
2012 on the four agency proposals and later in 2012
on the single agency proposal and a final rule will not
be published until some time after those dates. The
proposed rules currently require that banking entities
have the necessary compliance programs in place by
July 2012. Even with the publication of proposed
rules, however, there remains considerable
The PNC Financial Services Group, Inc. Form 10-K 13
 uncertainty and we are closely monitoring regulatory
developments related to the Volcker Rule. The
manner in which the questions posed by the proposed
rules are addressed by the agencies will have an
important influence on the impact of the final rules
on PNC. Although PNC no longer has a designated
proprietary trading operation, the proposed rules
broadly define what constitutes potentially prohibited
proprietary trading, thereby making the scope of
the statutory and regulatory exemptions for trading
activities, including the exemptions for hedging
activities and customer trading, all the more
important. Until more is known about how the final
rules will define proprietary trading and the scope
of permissible trading activities, it is not possible to
determine the impact to PNC of the proprietary
trading prohibition. However, any meaningful
limitation on PNCs ability to hedge its risks in the
ordinary course or to trade on behalf of customers
would likely be adverse to PNCs business and
results of operations. In addition, the proposed rules
contain extensive compliance and recordkeeping
requirements related to permissible trading activities.
Such requirements, if included in a final rule, could
increase the costs of hedging or other types of
permissible transactions and potentially result in PNC
not engaging in certain transactions, or types of
transactions, in which we would otherwise engage.
With respect to the restrictions on private equity and
hedge fund activities, as of December 31, 2011, PNC
held interests in such funds likely to be covered
totaling approximately $880 million and sponsored
three such funds with total invested capital of
approximately $441 million. PNC expects that over
time it will need to eliminate these investments and
cease sponsoring these funds, although it is likely
that at least some of these amounts will reduce over
time in the ordinary course before compliance is
required, and the Volcker Rule also permits
extensions of the compliance date under some
circumstances. A forced sale of some of these
investments due to the Volcker Rule could result in
PNC receiving less value than it would otherwise
have received. Depending on the provisions of the
final rule, it is possible that other structures through
which PNC conducts business, such as operating
subsidiaries, joint ventures or securitization vehicles,
but that are not typically referred to as private equity
or hedge funds, could be restricted, with an impact
that cannot now be evaluated.
Dodd-Frank requires the Federal Reserve to establish
enhanced prudential standards governing capital,
liquidity, risk management, stress testing and related
disclosures, and single-counterparty credit exposure
limits for bank holding companies and certain foreign
banking organizations with $50 billion or more in
14 The PNC Financial Services Group, Inc. Form 10-K
consolidated total assets (covered companies).
Dodd-Frank also requires the Federal Reserve to
establish an early remediation regime for covered
companies under which the Federal Reserve must or
may take increasingly stringent actions against a
covered company as its financial health deteriorates.
In December 2011, the Federal Reserve requested
comment on proposed rules that would implement
these requirements for domestic covered companies,
including PNC. The proposed enhanced prudential
standards would include, among other things,
heightened liquidity risk management and stress
testing requirements; new standards governing
oversight by a covered companys board of directors
and board-level risk committee; and new limits on
the aggregate amount of credit exposure a covered
company may have to any single customer or
counterparty. These proposed rules also would
establish an early remediation regime for covered
companies, under which the Federal Reserve would
be required to take increasingly stringent actions
against a covered company as its financial condition
or risk management deteriorated as reflected by the
companys current or projected post-stress capital
levels, compliance with supervisory liquidity and risk
management standards and, in some instances,
market-based indicators, such as credit default swap
spreads. Comments on the proposed rules will be
accepted until at least March 31, 2012. Final rules
will not be issued until some time after such date, and
as such the impact of these rules cannot now be
evaluated. Many aspects of the rules, at least as
proposed, would not become effective until mid-2013
at the earliest.
In addition, the relevant regulatory agencies have
proposed rules to implement the Dodd-Frank
provisions requiring retention of risk by certain
securitization participants through holding interests
in the securitization vehicles, but the rules are not yet
finalized or effective. As a result, the ultimate impact
of these Dodd-Frank provisions on PNC remains
unpredictable. That impact on PNC could be direct,
by requiring PNC to hold interests in a securitization
vehicle or other assets that represent a portion of the
credit risk of the assets held by the securitization
vehicle, or indirect, by impacting markets in which
PNC participates. Since the beginning of the financial
crisis, there has been and continues to be
substantially less private (that is, non-government
backed) securitization activity than had previously
been the case. It is unclear at present whether and to
what extent the private securitization markets will
rebound. In recent years PNC has only engaged in a
limited extent in securitization transactions under
circumstances where we might expect to be required
to retain additional risk on our balance sheet as a
 result of implementation of these Dodd-Frank reporting and robust record keeping requirements,
provisions. If the market for private securitizations business conduct requirements (including daily
rebounds and PNC decides to increase its valuations, disclosure of material risks associated
participation in that market, we would likely be with swaps, and disclosure of PNCs material
required under the regulations to retain more risk incentives and conflicts of interest related to its
than would otherwise have been the case, and as a derivatives business), and mandatory clearing and
result could be required to consolidate certain exchange trading of all standardized swaps
securitization vehicles on our balance sheet, with designated by the relevant regulatory agencies as
currently an uncertain financial impact. required to be cleared. To the extent PNC enters into
a swap with a special entity such as any federal
On the indirect impact side, PNC originates loans of
agency, state or state agency, city, county,
a variety of types, including residential and
municipality, or other political subdivisions of a
commercial mortgages, credit card, auto, and student,
state, additional business conduct requirements will
that historically have commonly been securitized,
be imposed on PNC, including the requirement that
and PNC is also a significant servicer of residential
PNC have a reasonable basis to believe that the
and commercial mortgages held by others, including
special entity has a qualified representative that
securitization vehicles. PNC anticipates that the risk
undertakes a duty to act in the best interests of the
retention requirements will impact the market for
special entity and that is independent of PNC and the
loans of types that historically have been securitized,
requirement that PNC disclose to the special entity
potentially affecting the volumes of loans securitized,
the capacity in which PNC is acting in connection
the types of loan products made available, the terms
with the swap (and if PNC is acting in more than one
on which loans are offered, consumer and business
capacity, the material differences between such
demand for loans, and the need for third-party loan
capacities). Further, to the extent PNC acts as an
servicers. It should be noted that the risk retention
advisor to a special entity, PNC will be required to
rules themselves could have the effect of slowing the
act in the best interests of the special entity. In
rebound in the securitization markets. One effect of
addition, the final rules for the registration of
having substantially reduced opportunities to
municipal advisors (which currently remain at the
securitize loans would likely be a reduction in the
proposal stage) could result in changes in the nature
willingness of banks, including PNC, to make loans
and extent of our municipal swaps business. The
due to balance sheet management requirements. Any
above described requirements will collectively
of these potential impacts of the Dodd-Frank risk
impose implementation and ongoing compliance
retention rules could affect the way in which PNC
burdens on PNC and will introduce additional legal
conducts its business, including its product offerings,
risk (including as a result of newly applicable
and could also affect PNCs revenue and
antifraud and anti-manipulation provisions and
profitability, although, as noted above, not in ways
private rights of action).
that are currently predictable.
New provisions under Dodd-Frank concerning the
Dodd-Frank imposes a new regulatory regime on the
applicability of state consumer protection laws to
U.S. derivatives markets. While some of the
national banks, such as PNC Bank, N.A., became
provisions related to derivatives came into effect
effective on July 21, 2011. Questions may arise as to
July 16, 2011, most of the new requirements await
whether certain state consumer financial laws that
final regulations from the relevant regulatory
may have previously been preempted by federal law
agencies for derivatives, the Commodity Futures
are no longer preempted as a result of the
Trading Commission (CFTC) (in the case of non
effectiveness of these new provisions. Depending on
security-based swaps) and the Securities and
how such questions are resolved, we may experience
Exchange Commission (SEC) (in the case of
an increase in state-level regulation of our retail
security-based swaps). One aspect of the Dodd-Frank
banking business and additional compliance
regulatory regime for non security-based swaps is
obligations, revenue impacts and costs. In addition,
that substantial oversight responsibility has been
provisions under Dodd-Frank that also took effect on
provided to the CFTC, which, as a result, will for the
July 21, 2011 permit state attorneys general to bring
first time have a meaningful supervisory role with
civil actions against national banks, such as PNC
respect to some of PNCs businesses. Although the
Bank, N.A., for violations of law, as well as
ultimate impact will depend on the final regulations,
regulations issued by the CFPB.
PNC expects that its derivatives business will be
subject to new substantive requirements, including Dodd-Frank requires bank holding companies that
registration with the CFTC, margin requirements in have $50 billion or more in assets, such as PNC, to
excess of current market practice, capital periodically submit to the Federal Reserve, the FDIC
requirements specific to this business, real time trade and the FSOC a resolution plan that includes, among

The PNC Financial Services Group, Inc. Form 10-K 15

 other things, an analysis of how the company could
be resolved in a rapid and orderly fashion if the
company were to fail or experience material financial
distress. The Federal Reserve and the FDIC may
jointly impose restrictions on PNC, including
additional capital requirements or limitations on
growth, if the agencies jointly determine that the
companys plan is not credible or would not facilitate
a rapid and orderly resolution of PNC under the U.S.
Bankruptcy Code, and additionally could require
PNC to divest assets or take other actions if we did
not submit an acceptable resolution plan within two
years after any such restrictions were imposed. The
FDIC also has adopted a rule that requires large
insured depository institutions, including PNC Bank,
N.A., to periodically submit a resolution plan to the
FDIC that includes, among other things, an analysis
of how the institution could be resolved under the
Federal Deposit Insurance Act (FDI Act) in a manner
that protects depositors and limits losses or costs to
creditors of the bank in accordance with the FDI Act.
PNC and PNC Bank, N.A. must file their first plans
under these rules by December 31, 2013. Depending
on how the agencies conduct their review of the
resolution plans submitted by PNC and PNC Bank,
N.A., it is possible that these requirements could
affect the ways in which PNC structures and
conducts its business and result in higher compliance
and operating costs.
Other provisions of Dodd-Frank will affect
regulatory oversight, holding company capital
requirements, and residential mortgage products.
While much of how the Dodd-Frank and other financial
industry reforms will change our current business operations
depends on the specific regulatory promulgations and
interpretations, many of which have yet to be released or
finalized, it is clear that the reforms, both under Dodd-Frank
and otherwise, will have a significant effect on our entire
industry. Although Dodd-Frank and other reforms will affect a
number of the areas in which we do business, it is not clear at
this time the full extent of the adjustments that will be
required and the extent to which we will be able to adjust our
businesses in response to the requirements. Although it is
difficult to predict the magnitude and extent of these effects at
this stage, we believe compliance with Dodd-Frank and its
implementing regulations and other initiatives will continue to
negatively impact revenue, at least to some extent, and
increase the cost of doing business, both in terms of transition
expenses and on an ongoing basis, and may also limit our
ability to pursue certain desirable business opportunities.
Capital requirements imposed by Dodd-Frank, together with
new capital and liquidity standards adopted by the Basel
Committee on Banking Supervision (the Basel Committee),
will result in banks and bank holding companies needing to
16 The PNC Financial Services Group, Inc. Form 10-K
maintain more and higher quality capital and greater
liquidity than has historically been the case.
New and evolving capital standards, both as a result of Dodd-
Frank and implementation of new capital standards adopted
by the Basel Committee, including the so-called Basel III
capital accord issued in December 2010, will have a
significant effect on banks and bank holding companies,
including PNC. Basel III, among other things, narrows the
definition of regulatory capital and establishes higher
minimum risk-based capital ratios that, when fully phased-in,
will require banking organizations, including PNC, to
maintain a minimum Tier 1 common ratio of 4.5%, a Tier 1
capital ratio of 6.0%, and a total capital ratio of 8.0%. A
capital conservation buffer of 2.5% above each of these levels
also is required, which potentially may be supplemented by an
additional countercyclical capital buffer. In addition, Basel III
introduces an international leverage ratio. The capital
standards adopted by the Basel Committee and to be
implemented in the United States also increase the capital
requirements for specific types of exposures (including
sub-investment grade securitization exposures) and requires
that unconsolidated investments in financial entities (potentially
including PNCs investment in BlackRock), as well as
mortgage servicing rights and deferred tax assets, above certain
thresholds be deducted from regulatory capital.
Basel III also includes new short-term liquidity standards (the
Liquidity Coverage Ratio) and long-term funding standards
(the Net Stable Funding Ratio). The Liquidity Coverage Ratio,
which is scheduled to take effect on January 1, 2015, is
designed to ensure that banking organizations maintain an
adequate level of cash, or assets that can readily be converted
to cash, to meet potential short-term liquidity needs. The Net
Stable Funding Ratio, which is scheduled to take effect by
January 1, 2018, is designed to promote a stable maturity
structure of assets and liabilities of banking organizations over
a one-year time horizon.
In November 2011, the Basel Committee also adopted a
framework that would require globally systemically important
banks (G-SIBs) to maintain additional Tier 1 common
capital ranging between 1.0% to 2.5% of risk-weighted assets,
with the actual required amount varying based on the firms
global systemic importance as determined using five criteria
(size, interconnectedness, lack of substitutability, cross-
jurisdictional activity, and complexity). Regulatory authorities
have not yet definitively determined the banking organizations
that would be subject to a surcharge as a G-SIB although,
based on the criteria included in the Basel Committees
framework, PNC believes that it is unlikely to be deemed a
G-SIB. Dodd-Frank directs the Federal Reserve to establish
heightened risk-based and leverage capital requirements and
liquidity requirements for bank holding companies, like PNC,
that have $50 billion or more in assets. The Federal Reserve
has proposed to rely primarily on the forthcoming Basel III
capital and liquidity rules, as well as certain existing or
proposed rules, to fulfill this directive. However, the Federal
Reserve has stated that it is still considering whether to
impose an additional capital surcharge on bank holding
companies that have $50 billion or more in consolidated total
assets, but that are not subject to a G-SIB surcharge.
Because implementation of the new Basel III capital and
liquidity standards, as well as any additional heightened
capital or liquidity standards that may be established by the
Federal Reserve under the Dodd-Frank Act, remain subject to
rule making in the U.S. and, in many cases, to extended
observation and phase-in periods, the full effect of these
standards on PNCs regulatory capital is uncertain at this time.
However, pursuant to the Collins Amendment to Dodd-
Frank, the U.S. federal banking agencies recently adopted a
final rule that requires the phase-out of trust preferred
securities from Tier 1 regulatory capital, and defined the risk-
based capital standards generally applicable to all banking
organizations. As of December 31, 2011, PNC had $2.4
billion of trust preferred securities included in Tier 1 capital
which, under these rules and to the extent the securities remain
outstanding, will no longer qualify as Tier 1 capital over time.
In December 2011, the Federal banking agencies also
requested comment on proposed rules that would replace the
use of credit ratings as a means of determining regulatory
capital requirements under the agencies market risk capital
rule with alternative methodologies, as required by
Section 939A of Dodd-Frank. The agencies have indicated
that the credit rating alternatives developed through this
rulemaking likely would be incorporated into the agencies
general risk-based capital rules affecting so-called banking
book exposures. Accordingly, the credit rating alternatives
that are adopted by the agencies through the market risk
rulemaking are likely to significantly influence the amount of
capital that PNC and other U.S. banking organizations must
hold with respect to a wide range of exposures including
sovereign, state, municipal, corporate, financial institution and
securitization exposures, although the extent to which the final
rules will ultimately lead to increased or decreased capital
requirements for specific types of exposures or for PNC in the
aggregate is not known at this time.
The need to maintain more and higher quality capital, as well
as greater liquidity, going forward than historically has been
required could limit PNCs business activities, including
lending, and its ability to expand, either organically or through
acquisitions. It could also result in PNC taking steps to
increase its capital that may be dilutive to shareholders or
being limited in its ability to pay dividends or otherwise return
capital to shareholders, or selling or refraining from acquiring
assets, the capital requirements for which are inconsistent with
the assets underlying risks. In addition, the new liquidity
standards could require PNC to increase its holdings of highly
liquid short-term investments, thereby reducing PNCs ability
to invest in longer-term assets even if more desirable from a
balance sheet management perspective. Moreover, although
these new requirements are being phased in over time, U.S.
federal banking agencies have been taking into account
expectations regarding the ability of banks to meet these new
requirements, including under stressed conditions, in
approving actions that represent uses of capital, such as
dividend increases, share repurchases and acquisitions.
Our lending and servicing businesses and the value of the
loans and debt securities we hold may be adversely
affected by economic conditions, including a reversal or
slowing of the current moderate recovery. Downward
valuation of debt securities could also negatively impact
our capital position.
Given the high percentage of our assets represented directly or
indirectly by loans, and the importance of lending to our
overall business, weak economic conditions are likely to have
a negative impact on our business and our results of
operations. This could adversely impact loan utilization rates
as well as delinquencies, defaults and customer ability to meet
obligations under the loans. This is particularly the case
during the period in which the aftermath of recessionary
conditions continues and the positive effects of economic
recovery appear to be slow to materialize and unevenly spread
among our customers.
Further, weak economic conditions would likely have a
negative impact on our business, our ability to serve our
customers, and our results of operations. Such conditions are
likely to lead to increases in the number of borrowers who
become delinquent or default or otherwise demonstrate a
decreased ability to meet their obligations under their loans.
This would result in higher levels of non-performing loans,
net charge-offs, provision for credit losses and valuation
adjustments on loans held for sale. The value to us of other
assets such as investment securities, most of which are debt
securities or other financial instruments supported by loans,
similarly would be negatively impacted by widespread
decreases in credit quality resulting from a weakening of the
economy.
We have historically not considered government insured or
guaranteed loans to be higher risk loans as defaults are
materially mitigated by payments of insurance or guaranteed
amounts for approved claims by the applicable government
agency. While the level of claim denials by government
agencies, including the Department of Housing and Urban
Development, has historically been low, if financial conditions
prompt government agencies to deny or curtail an increasing
number of these claims, we could face additional losses in our
lending business. In addition, in the event that submitted
claims are denied or curtailed as a result of our failure as a
servicer of the loan to adhere to applicable agency servicing
guidelines, we will be required to remit the difference between
the claims proceeds that should have been received and the
claim amounts actually received to the holder of the loan.
The PNC Financial Services Group, Inc. Form 10-K 17
A failure to sustain reduced amounts of the provision for
credit losses, which has benefitted results of operations in
recent periods, could result in decreases in net income.
As was typical in the banking industry, the economic
downturn that started in 2007 resulted in PNC experiencing
high levels of provision for credit losses. In the quarters from
the fourth quarter of 2008 through the second quarter of 2010,
PNCs provision for credit losses ranged from $751 million to
$1.1 billion in each quarter. Subsequently, in part due to
improvement in economic conditions, as well as actions taken
by PNC to manage its portfolio, PNCs provision for credit
losses has declined substantially, reaching a level of $190
million in the fourth quarter of 2011. This decline in provision
for credit losses has been a major contributor to PNCs ability
to maintain and grow its net income during this period. If
PNCs provision for credit losses were to rise back towards
levels experienced during the height of the economic
downturn, it would have an adverse effect on PNCs net
income and could result in lower levels of net income than
PNC has reported in recent periods.
Our regional concentrations make us particularly at risk
to adverse economic conditions in our primary retail
banking footprint.
Although many of our businesses are national in scope, our
retail banking business is concentrated within our retail branch
network footprint, located principally in our primary
geographic markets. Following the expected acquisition of
RBC Bank (USA), this footprint will expand to include North
Carolina, South Carolina, and Alabama. Thus, we are or in the
future may be particularly vulnerable to adverse changes in
economic conditions in the Mid-Atlantic, Midwest, and
Southeast regions.
Our business and performance are vulnerable to the
impact of volatility in debt and equity markets.
As most of our assets and liabilities are financial in nature, we
tend to be particularly sensitive to the performance of the
financial markets. Turmoil and volatility in U.S. and global
financial markets, such as that experienced during the recent
financial crisis, can be a major contributory factor to overall
weak economic conditions, leading to some of the risks
discussed above, including the impaired ability of borrowers
and other counterparties to meet obligations to us. Financial
market volatility also can have some of the following adverse
effects on PNC and our business and financial performance:
It can affect the value or liquidity of our on-balance
sheet and off-balance sheet financial instruments.
It can affect the value of servicing rights, including
those we carry at fair value.
It can affect our ability to access capital markets to
raise funds necessary to support our businesses and
maintain our overall liquidity position. Inability to
access capital markets as needed, or at cost effective
rates, could adversely affect our liquidity and results
of operations.
18 The PNC Financial Services Group, Inc. Form 10-K
It can affect the value of the assets that we manage or
otherwise administer for others or the assets for
which we provide processing and information
services. Although we are not directly impacted by
changes in the value of such assets, decreases in the
value of those assets would affect related fee income
and could result in decreased demand for our
services.
It can affect the required funding of our pension
obligations to the extent that the value of the assets
supporting those obligations drops below minimum
levels.
In general, it can impact the nature, profitability or
risk profile of the financial transactions in which we
engage.
Volatility in the markets for real estate and other assets
commonly securing financial products has been and is likely
to continue to be a significant contributor to overall volatility
in financial markets.
Our business and financial performance is impacted
significantly by market interest rates and movements in
those rates. The monetary, tax and other policies of
governmental agencies, including the Federal Reserve,
have a significant impact on interest rates and overall
financial market performance over which we have no
control and which we may not be able to predict
adequately.
As a result of the high percentage of our assets and liabilities
that are in the form of interest-bearing or interest-related
instruments, changes in interest rates, in the shape of the yield
curve or in spreads between different market interest rates can
have a material effect on our business, our profitability and the
value of our financial assets and liabilities. For example:
Changes in interest rates or interest rate spreads can
affect the difference between the interest that we earn
on assets and the interest that we pay on liabilities,
which impacts our overall net interest income and
profitability.
Such changes can affect the ability of borrowers to
meet obligations under variable or adjustable rate
loans and other debt instruments, and can, in turn,
affect our loss rates on those assets.
Such changes may decrease the demand for interest
rate based products and services, including loans and
deposit accounts.
Such changes can also affect our ability to hedge
various forms of market and interest rate risk and
may decrease the profitability or increase the risk
associated with such hedges.
Movements in interest rates also affect mortgage
prepayment speeds and could result in impairments
of mortgage servicing assets or otherwise affect the
profitability of such assets.
The monetary, tax and other policies of the government and its
agencies, including the Federal Reserve, have a significant
impact on interest rates and overall financial market
performance. These governmental policies can thus affect the
activities and results of operations of banking companies such
as PNC. An important function of the Federal Reserve is to
regulate the national supply of bank credit and certain interest
rates. The actions of the Federal Reserve influence the rates of
interest that we charge on loans and that we pay on
borrowings and interest-bearing deposits and can also affect
the value of our on-balance sheet and off-balance sheet
financial instruments. Both due to the impact on rates and by
controlling access to direct funding from the Federal Reserve
Banks, the Federal Reserves policies also influence, to a
significant extent, our cost of funding. We cannot predict the
nature or timing of future changes in monetary, tax and other
policies or the effect that they may have on our activities and
financial results.
PNC faces increased risk arising out of its residential
mortgage businesses.
Numerous federal and state governmental, legislative and
regulatory authorities are investigating practices in the
mortgage lending, servicing and mortgage-related insurance
and reinsurance industries. PNC has received inquiries from
governmental, legislative and regulatory authorities on these
topics and is responding to these inquiries. These inquiries and
investigations could lead to administrative, civil or criminal
proceedings, possibly resulting in remedies including fines,
penalties, restitution, alterations in our business practices and
additional expenses and collateral costs. See Note 22 Legal
Proceedings in the Notes to Consolidated Financial Statements
in Item 8 of this Report for additional information regarding
federal and state governmental, legislative and regulatory
inquiries and investigations, including the consent orders
entered into by PNC and PNC Bank, N. A. with the Federal
Reserve and the OCC, respectively.
In addition to governmental or regulatory inquiries and
investigations, PNC, like other companies with residential
mortgage origination and servicing operations, faces the risk
of class actions, other litigation and claims from the owners
of, investors in or purchasers of mortgages originated or
serviced by PNC (or securities backed by such mortgages);
homeowners involved in foreclosure proceedings or various
mortgage-related insurance programs; downstream purchasers
of homes sold after foreclosure; title insurers; and other
potential claimants. At this time PNC cannot predict the
ultimate overall cost to or effect upon PNC from
governmental, legislative or regulatory actions and private
litigation or claims arising out of residential mortgage lending,
servicing or reinsurance practices, although such actions,
litigation and claims could, individually or in the aggregate,
result in significant expense.
The issues described above may affect the value of our
ownership interests, direct or indirect, in property subject to
foreclosure. In addition, possible delays in the schedule for
processing foreclosures may result in an increase in
nonperforming loans, additional servicing costs and possible
demands for contractual fees or penalties under servicing
agreements.
There is also an increased risk of incurring costs related to
further remedial and related efforts required by the consent
orders and related to repurchase requests arising out of either
the foreclosure process or origination issues. Reputational
damage arising out of this industry-wide inquiry could also
have an adverse effect upon our existing mortgage business
and could reduce future business opportunities.
One or more of the foregoing could adversely affect PNCs
business, financial condition, results of operations or cash
flows.
We grow our business in part by acquiring other financial
services companies from time to time, and these
acquisitions present a number of risks and uncertainties
related both to the acquisition transactions themselves and
to the integration of the acquired businesses into PNC
after closing.
Acquisitions of other financial services companies, financial
services assets and related deposits and other liabilities present
risks and uncertainties to PNC in addition to those presented
by the nature of the business acquired.
In general, acquisitions may be substantially more expensive
to complete than anticipated (including unanticipated costs
incurred in connection with the integration of the acquired
company). Anticipated benefits (including anticipated cost
savings and strategic gains) may be significantly harder or
take longer to achieve than expected or may not be achieved
in their entirety as a result of unexpected factors or events.
Our ability to achieve anticipated results from acquisitions is
often dependent also on the extent of credit losses in the
acquired loan portfolios and the extent of deposit attrition,
which are, in part, related to the state of economic and
financial markets. Also, litigation and governmental
investigations that may be filed or commenced, as a result of
an acquisition or otherwise, could impact the timing or
realization of anticipated benefits to PNC.
Integration of an acquired companys business and operations
into PNC, including conversion of the acquired companys
different systems and procedures, may take longer than
anticipated or be more costly than anticipated or have
unanticipated adverse results relating to the acquired
companys or PNCs existing businesses. In some cases,
acquisitions involve our entry into new businesses or new
The PNC Financial Services Group, Inc. Form 10-K 19
geographic or other markets, and these situations also present
risks and uncertainties in instances where we may be
inexperienced in these new areas.
Our ability to analyze the risks presented by prospective
acquisitions, as well as our ability to prepare in advance of
closing for integration, depends, in part, on the information we
can gather with respect to the target, which is more limited
than the information we have regarding companies we already
own.
Our pending acquisition of RBC Bank (USA) presents many
of the risks and uncertainties related to acquisition
transactions themselves and to the integration of the acquired
businesses into PNC after closing described above.
As a regulated financial institution, our ability to pursue or
complete attractive acquisition opportunities could be
negatively impacted by regulatory delays or other regulatory
issues. In addition, legal and regulatory or other governmental
proceedings, claims, investigations or inquiries relating to
pre-acquisition business and activities of acquired companies
may result in future monetary judgments or settlements or
other remedies, including damages, fines, penalties, restitution
or alterations in our business practices, and in additional
expenses and collateral costs, and may cause reputational
harm to PNC. The processes of integrating acquired
businesses, as well as the deconsolidation of divested
businesses, also pose many additional possible risks which
could result in increased costs, liability or other adverse
consequences to PNC. Note 22 Legal Proceedings in the Notes
To Consolidated Financial Statements in Item 8 of this Report
describes several legal proceedings related to pre-acquisition
activities of companies we have acquired, including National
City. Other such legal proceedings may be commenced in the
future.
The soundness of other financial institutions could
adversely affect us.
Financial services institutions are interrelated as a result of
trading, clearing, counterparty, and other relationships. We
have exposure to many different industries and counterparties,
and we routinely execute transactions with counterparties in
the financial services industry, including brokers and dealers,
commercial banks, investment banks, mutual and hedge funds,
and other institutional clients. Many of these transactions
expose us to credit risk in the event of default of our
counterparty or client. In addition, our credit risk may be
exacerbated when the collateral held by us cannot be realized
upon or is liquidated at prices that are not sufficient to recover
the full amount of the loan or derivative exposure due us.
We operate in a highly competitive environment, in terms
of the products and services we offer and the geographic
markets in which we conduct business, as well as in our
labor markets where we compete for talented employees.
Competition could adversely impact our customer
acquisition, growth and retention, as well as our credit
20 The PNC Financial Services Group, Inc. Form 10-K
spreads and product pricing, causing us to lose market
share and deposits and revenues.
We are subject to intense competition from various financial
institutions as well as from non-bank entities that engage in
many similar activities without being subject to bank
regulatory supervision and restrictions. This competition is
described in Item 1 of this Report under Competition.
In all, the principal bases for competition are pricing
(including the interest rates charged on loans or paid on
interest-bearing deposits), product structure, the range of
products and services offered, and the quality of customer
service (including convenience and responsiveness to
customer needs and concerns). The ability to access and use
technology is an increasingly important competitive factor in
the financial services industry, and it is a critically important
component to customer satisfaction as it affects our ability to
deliver the right products and services.
Another increasingly competitive factor in the financial
services industry is the competition to attract and retain
talented employees across many of our business and support
areas. This competition leads to increased expenses in many
business areas and can also cause us to not pursue certain
business opportunities.
A failure to adequately address the competitive pressures we
face could make it harder for us to attract and retain customers
across our businesses. On the other hand, meeting these
competitive pressures could require us to incur significant
additional expense or to accept risk beyond what we would
otherwise view as desirable under the circumstances. In
addition, in our interest rate sensitive businesses, pressures to
increase rates on deposits or decrease rates on loans could
reduce our net interest margin with a resulting negative impact
on our net interest income.
The performance of our asset management businesses may
be adversely impacted by overall economic and market
conditions as well as the relative performance of our
products compared with the offerings by competitors.
Asset management revenue is primarily based on a percentage
of the value of the assets and thus is impacted by general
changes in market valuations, customer preferences and needs.
In addition, investment performance is an important factor
influencing the level of assets. Poor investment performance
could impair revenue and growth as existing clients might
withdraw funds in favor of better performing products.
Additionally, the ability to attract funds from existing and new
clients might diminish. Overall economic conditions may limit
the amount that customers are able or willing to invest as well
as the value of the assets they do invest.
The failure or negative performance of products of other
financial institutions could lead to a loss of confidence in
similar products offered by us without regard to the
performance of our products. Such a negative contagion could
lead to withdrawals, redemptions and liquidity issues in such
products and have a material adverse impact on our assets
under management and asset management revenues and
earnings.
As a regulated financial services firm, we are subject to
numerous governmental regulations and to comprehensive
examination and supervision by regulators, which affect
our business as well as our competitive position.
PNC is a bank holding company and a financial holding
company and is subject to numerous governmental regulations
involving both its business and organization.
Our businesses are subject to regulation by multiple bank
regulatory bodies as well as multiple securities industry
regulators. Applicable laws and regulations restrict our ability
to repurchase stock or to receive dividends from subsidiaries
that operate in the banking and securities businesses and
impose capital adequacy requirements. PNCs ability to
service its obligations is dependent on the receipt of dividends
and advances from its subsidiaries. Applicable laws and
regulations also restrict permissible activities and investments
and require compliance with protections for loan, deposit,
brokerage, fiduciary, mutual fund and other customers, and for
the protection of customer information, among other things.
We are also subject to laws and regulations designed to
combat money laundering, terrorist financing, and transactions
with persons, companies or foreign governments designated
by U.S. authorities. The consequences of noncompliance can
include substantial monetary and nonmonetary sanctions as
well as damage to our reputation and businesses.
In addition, we are subject to comprehensive examination and
supervision by banking and other regulatory bodies.
Examination reports and ratings (which often are not publicly
available) and other aspects of this supervisory framework can
materially impact the conduct, growth, and profitability of our
businesses.
Due to the current economic environment and issues facing
the financial services industry, we anticipate that there will be
new legislative and regulatory initiatives over the next several
years, including many focused specifically on banking and
other financial services in which we are engaged. These
initiatives will be in addition to the actions already taken by
Congress and the regulators, through enactment of the Credit
CARD Act, the SAFE Act, and Dodd-Frank, as well as
changes to the regulations implementing the Real Estate
Settlement Procedures Act, the Federal Truth in Lending Act,
and the Electronic Fund Transfer Act. Legislative and
regulatory initiatives have had and are likely to continue to
have an impact on the conduct of our business. This impact
could include rules and regulations that affect the nature and
profitability of our business activities, how we use our capital,
how we compensate and incent our employees, the type and
amount of instruments we hold for liquidity purposes, and
other matters potentially having a negative effect on our
overall business results and prospects.
Under the regulations of the Federal Reserve, a bank holding
company is expected to act as a source of financial and
managerial strength for its subsidiary banks. As a result, the
Federal Reserve could require PNC to commit resources to
PNC Bank, N.A. when doing so is not otherwise in the
interests of PNC or its shareholders or creditors.
Our ability to pay dividends to shareholders is largely
dependent on dividends from our operating subsidiaries,
principally PNC Bank, N.A. Banks are subject to regulation
on the amount and circumstances of dividends they can pay to
their holding companies.
We discuss these and other regulatory issues applicable to
PNC, including some particular areas of current regulatory
focus or concern, in the Supervision and Regulation section
included in Item 1 of this Report and in Note 21 Regulatory
Matters in the Notes To Consolidated Financial Statements in
Item 8 of this Report and here by reference.
A failure to comply, or to have adequate policies and
procedures designed to comply, with regulatory requirements
could expose us to damages, fines and regulatory penalties
and other regulatory actions, which could be significant, and
could also injure our reputation with customers and others
with whom we do business.
We must comply with generally accepted accounting
principles established by the Financial Accounting Standards
Board, accounting, disclosure and other rules set forth by the
SEC, income tax and other regulations established by the US
Treasury and state and local taxing authorities, and revenue
rulings and other guidance issued by the Internal Revenue
Service, which affect our financial condition and results of
operations.
Changes in accounting standards, or interpretations of those
standards, can impact our revenue recognition and expense
policies and affect our estimation methods used to prepare the
consolidated financial statements. Changes in income tax
regulations, revenue rulings, revenue procedures, and other
guidance can impact our tax liability and alter the timing of
cash flows associated with tax deductions and payments. New
guidance often dictates how changes to standards and
regulations are to be presented in our consolidated financial
statements, as either an adjustment to beginning retained
earnings for the period or as income or expense in current
period earnings. In some cases, changes may be applied to
previously reported disclosures.
The PNC Financial Services Group, Inc. Form 10-K 21
The determination of the amount of loss allowances and
impairments taken on our assets is highly subjective, and
inaccurate estimates could materially impact our results of
operations or financial position.
The determination of the amount of loss allowances and asset
impairments varies by asset type and is based upon our
periodic evaluation and assessment of known and inherent
risks associated with the respective asset class. Such
evaluations and assessments are revised as conditions change
and new information becomes available. Management updates
its evaluations regularly and reflects changes in allowances
and impairments in operations as such evaluations are revised.
Although we have policies and procedures in place to
determine loss allowance and asset impairments, due to the
substantial subjective nature of this area, there can be no
assurance that our management has accurately assessed the
level of impairments taken and allowances reflected in our
financial statements. Furthermore, additional impairments
may need to be taken or allowances provided for in the future.
Historical trends may not be indicative of future impairments
or allowances.
Our asset valuation may include methodologies,
estimations and assumptions that are subject to differing
interpretations and this, along with market factors such as
volatility in one or more markets, could result in changes
to asset valuations that may materially adversely affect
our results of operations or financial condition.
We must use estimates, assumptions, and judgments when
assets and liabilities are measured and reported at fair value.
Assets and liabilities carried at fair value inherently result in a
higher degree of financial statement volatility. Fair values and
the information used to record valuation adjustments for
certain assets and liabilities are based on quoted market prices
and/or other observable inputs provided by independent third-
party sources, when available. When such third-party
information is not available, we estimate fair value primarily
by using cash flow and other financial modeling techniques
utilizing assumptions such as credit quality, liquidity, interest
rates and other relevant inputs. Changes in underlying factors
or assumptions in any of the areas underlying our estimates
could materially impact our future financial condition and
results of operations.
During periods of market disruption, including periods of
significantly rising or high interest rates, rapidly widening
credit spreads or illiquidity, it may be more difficult to value
certain of our assets if trading becomes less frequent and/or
market data becomes less observable. There may be certain
asset classes that were historically in active markets with
significant observable data that rapidly become illiquid due to
market volatility, a loss in market confidence or other factors.
In such cases, valuations in certain asset classes may require
more subjectivity and management judgment; valuations may
include inputs and assumptions that are less observable or
22 The PNC Financial Services Group, Inc. Form 10-K
require greater estimation. Further, rapidly changing and
unprecedented market conditions in any particular market (e.g.
credit, equity, fixed income, foreign exchange) could
materially impact the valuation of assets as reported within
our consolidated financial statements, and the period-to-period
changes in value could vary significantly.
We are subject to operational risk.
Like all businesses, we are subject to operational risk, which
represents the risk of loss resulting from human error,
inadequate or failed internal processes and systems, and
external events. Operational risk also encompasses
compliance and legal risk, which is the risk of loss from
violations of, or noncompliance with, laws, rules, regulations,
prescribed practices or ethical standards, as well as the risk of
our noncompliance with contractual and other obligations. We
are also exposed to operational risk through our outsourcing
arrangements, and the effect that changes in circumstances or
capabilities of our outsourcing vendors can have on our ability
to continue to perform operational functions necessary to our
business. Although we seek to mitigate operational risk
through a system of internal controls which we review and
update, no system of controls, however well designed and
maintained, is infallible. Control weaknesses or failures or
other operational risks could result in charges, increased
operational costs, harm to our reputation or foregone business
opportunities.
We continually encounter technological change and we
could falter in our ability to remain competitive in this
arena.
The financial services industry is continually undergoing rapid
technological change with frequent introductions of new
technology-driven products and services. The effective use of
technology increases efficiency and enables financial
institutions to better serve customers and to reduce costs. Our
continued success depends, in part, upon our ability to address
the needs of our customers by using technology to provide
products and services that satisfy customer demands and
create efficiencies in our operations. We may not be able to
effectively implement new technology-driven products and
services that allow us to remain competitive or be successful
in marketing these products and services to our customers.
Our information systems may experience interruptions or
breaches in security.
We rely heavily on communications and information systems
to conduct our business. Any failure, interruption or breach in
security of these systems could result in disruptions to our
accounting, deposit, loan and other systems, and adversely
affect our customer relationships. While we have policies and
procedures designed to prevent or limit the effect of these
possible events, there can be no assurance that any such
failure, interruption or security breach will not occur or, if any
does occur, that it can be sufficiently remediated.
There have been increasing efforts on the part of third parties
to breach data security at financial institutions or with respect
to financial transactions, including through the use of social
engineering schemes such as phishing. In addition, because
the techniques used to cause such security breaches change
frequently, often are not recognized until launched against a
target and may originate from less regulated and remote areas
around the world, we may be unable to proactively address
these techniques or to implement adequate preventative
measures. The ability of our customers to bank remotely,
including online and through mobile devices, requires secure
transmission of confidential information and increases the risk
of data security breaches.
Although to date efforts to breach our data security have not
had a material impact on PNC, the occurrence of any such
failure, interruption or security breach of our systems,
particularly if widespread or resulting in financial losses to our
customers, could damage our reputation, result in a loss of
customer business, subject us to additional regulatory scrutiny,
or expose us to civil litigation and financial liability.
Our business and financial results could be impacted
materially by adverse results in legal proceedings.
Many aspects of our business involve substantial risk of legal
liability. We have been named or threatened to be named as
defendants in various lawsuits arising from our business
activities (and in some cases from the activities of companies
we have acquired). In addition, we are regularly the subject of
governmental investigations and other forms of regulatory
inquiry. We also are at risk when we have agreed to indemnify
others for losses related to legal proceedings, including
litigation and governmental investigations and inquiries, they
face, such as in connection with the sale of a business or assets
by us. The results of these legal proceedings could lead to
significant monetary damages or penalties, restrictions on the
way in which we conduct our business, or reputational harm.
Although we establish accruals for legal proceedings when
information related to the loss contingencies represented by
those matters indicates both that a loss is probable and that the
amount of loss can be reasonably estimated, we do not have
accruals for all legal proceedings where we face a risk of loss.
In addition, due to the inherent subjectivity of the assessments
and unpredictability of the outcome of legal proceedings,
amounts accrued may not represent the ultimate loss to us
from the legal proceedings in question. Thus, our ultimate
losses may be higher, and possibly significantly so, than the
amounts accrued for legal loss contingencies.
We discuss further the unpredictability of legal proceedings
and describe some of our pending legal proceedings in Note
22 Legal Proceedings in the Notes To Consolidated Financial
Statements in Item 8 of this Report.
Our business and financial performance could be
adversely affected, directly or indirectly, by disasters, by
terrorist activities or by international hostilities.
Neither the occurrence nor the potential impact of disasters,
terrorist activities and international hostilities can be
predicted. However, these occurrences could impact us
directly (for example, by causing significant damage to our
facilities or preventing us from conducting our business in the
ordinary course), or indirectly as a result of their impact on
our borrowers, depositors, other customers, suppliers or other
counterparties. We could also suffer adverse consequences to
the extent that disasters, terrorist activities or international
hostilities affect the financial markets or the economy in
general or in any particular region. These types of impacts
could lead, for example, to an increase in delinquencies,
bankruptcies or defaults that could result in our experiencing
higher levels of nonperforming assets, net charge-offs and
provisions for credit losses.
Our ability to mitigate the adverse consequences of such
occurrences is in part dependent on the quality of our
resiliency planning, and our ability, if any, to anticipate the
nature of any such event that occurs. The adverse impact of
disasters or terrorist activities or international hostilities also
could be increased to the extent that there is a lack of
preparedness on the part of national or regional emergency
responders or on the part of other organizations and businesses
that we deal with, particularly those that we depend upon but
have no control over.
ITEM 1B UNRESOLVED STAFF COMMENTS
There are no SEC staff comments regarding PNCs periodic or
current reports under the Exchange Act that are pending
resolution.
ITEM 2 PROPERTIES
Our executive and primary administrative offices are located
at One PNC Plaza, Pittsburgh, Pennsylvania. The 30-story
structure is owned by PNC Bank, N.A.
We own or lease numerous other premises for use in
conducting business activities, including operations centers,
offices, and branch and other facilities. We consider the
facilities owned or occupied under lease by our subsidiaries to
be adequate. We include here by reference the additional
information regarding our properties in Note 10 Premises,
Equipment and Leasehold Improvements in the Notes To
Consolidated Financial Statements in Item 8 of this Report.
The PNC Financial Services Group, Inc. Form 10-K 23
ITEM 3 LEGAL PROCEEDINGS
See the information set forth in Note 22 Legal Proceedings in
the Notes To Consolidated Financial Statements in Item 8 of
this Report, which is incorporated here by reference.
William S. Demchak has served as Senior Vice Chairman
since February 2009. Since August 2005, he has had oversight
responsibilities for the Corporations Corporate & Institutional
Banking business, as well as PNCs asset and liability
management activities. Beginning in September 2010, he
assumed supervisory responsibility for all PNC businesses.

ITEM 4 MINE SAFETY DISCLOSURES Thomas K. Whitford has served as Vice Chairman since
February 2009. He was appointed Chief Administrative
Officer in May 2007. From April 2002 through May 2007 and
Not applicable then from November 2009 until April 2010, he served as
Chief Risk Officer.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding each of our executive officers as of Joan L. Gulley has served as Chief Human Resources Officer
February 17, 2012 is set forth below. Executive officers do not since April 2008. She was appointed Senior Vice President in
have a stated term of office. Each executive officer has held April 2008 and then Executive Vice President in February
the position or positions indicated or another executive 2009. She served as Chief Executive Officer for PNCs wealth
position with the same entity or one of its affiliates for the past management business from 2002 to 2006. From 1998 until
five years unless otherwise indicated below. April 2008, she served as Executive Vice President of PNC
Bank, N.A. and was responsible for product and segment
Year
management, as well as advertising and brand management
Name Age Position with PNC Employed (1) for PNC.
James E. Rohr 63 Chairman and Chief 1972
Executive Officer (2) Michael J. Hannon has served as Executive Vice President
Joseph C. Guyaux 61 Senior Vice Chairman 1972 since February 2009, prior to which he served as Senior Vice
and Chief Risk
Officer President. He has served as Chief Credit Officer since
William S. Demchak 49 Senior Vice Chairman 2002 November 2009. From February 2009 to November 2009 he
Thomas K. Whitford 55 Vice Chairman 1983 also served as Chief Risk Officer and served as Interim Chief
Joan L. Gulley 64 Executive Vice 1986
President and Chief Risk Officer from December 2011 to February 2012.
Human Resources
Officer Robert F. Hoyt has served as PNCs Chief Regulatory Affairs
Michael J. Hannon 55 Executive Vice 1982 Officer since May 2009. He has also served as Senior Deputy
President and Chief
Credit Officer General Counsel since October 2009, and served as director of
Robert F. Hoyt 47 Executive Vice 2009 business planning from May 2009 to November 2011. He was
President, Senior appointed Executive Vice President in November 2011 and
Deputy General
Counsel, and Chief was previously Senior Vice President. From December 2006
Regulatory Affairs to January 2009, Hoyt served as General Counsel of the U.S.
Officer Department of the Treasury.
Richard J. Johnson 55 Executive Vice 2002
President and Chief
Financial Officer Richard J. Johnson has served as Chief Financial Officer since
Michael P. Lyons 41 Executive Vice 2011 August 2005. He was appointed Executive Vice President in
President
E. William Parsley, III 46 Executive Vice 2003
February 2009 and was previously Senior Vice President.
President, Chief
Investment Officer Michael P. Lyons joined PNC in October 2011 and is head of
and Treasurer Corporate and Institutional Banking. Previously he served as
Helen P. Pudlin 62 Executive Vice 1989
President and General head of corporate development and strategic planning for
Counsel Bank of America, principal investment advisor at Maverick
Robert Q. Reilly 47 Executive Vice 1987 Capital, and as a director in Morgan Stanleys financial
President
institutions group. He was appointed Executive Vice President
Gregory H. Kozich 48 Senior Vice President
and Controller 2010 in November 2011.
(1) Where applicable, refers to year employed by predecessor company.
(2) Also serves as a director of PNC. Biographical information for Mr. Rohr is included E. William Parsley, III has served as Treasurer and Chief
in Election of Directors (Item 1) in our proxy statement for the 2012 annual Investment Officer since January 2004. He was appointed
meeting of shareholders.
Executive Vice President of PNC in February 2009.

Joseph C. Guyaux was appointed Senior Vice Chairman and Helen P. Pudlin has served as General Counsel since 1994.
Chief Risk Officer in February 2012, prior to which he served She was appointed Executive Vice President in February 2009
as President. and was previously Senior Vice President.

24 The PNC Financial Services Group, Inc. Form 10-K

Robert Q. Reilly has served as the head of PNCs Asset
Management Group since 2005. Previously, he held numerous
management roles in both Corporate Banking and Asset
Management. He was appointed Executive Vice President in
February 2009.
Gregory H. Kozich joined PNC as Senior Vice President of
PNC Bank, N.A. in October 2010. He has served as Senior
Vice President of PNC since February 2011 and Corporate
Controller for PNC since March 2011. Prior to joining PNC,
he was with Fannie Mae as its corporate controller and
PricewaterhouseCoopers LLP as a partner in its National
Banking Group.
DIRECTORS OF THE REGISTRANT
The name, age and principal occupation of each of our
directors as of February 17, 2012, and the year he or she first
became a director is set forth below:
Richard O. Berndt, 69, Managing Partner of
Gallagher, Evelius & Jones LLP (law firm) (2007)
Charles E. Bunch, 62, Chairman and Chief Executive
Officer of PPG Industries, Inc. (coatings, sealants
and glass products) (2007)
Paul W. Chellgren, 69, Operating Partner, Snow
Phipps Group, LLC (private equity) (1995)
Kay Coles James, 62, President and Founder of The
Gloucester Institute (non-profit) (2006)
Richard B. Kelson, 65, President and Chief Executive
Officer, ServCo, LLC (strategic sourcing, supply
chain management) (2002)
Bruce C. Lindsay, 70, Chairman and Managing
Member of 2117 Associates, LLC (business
consulting firm) (1995)
Anthony A. Massaro, 67, Retired Chairman and
Chief Executive Officer of Lincoln Electric
Holdings, Inc. (manufacturer of welding and cutting
products) (2002)
Jane G. Pepper, 66, Retired President of the
Pennsylvania Horticultural Society (non-profit)
(1997)
James E. Rohr, 63, Chairman and Chief Executive
Officer of PNC (1990)
Donald J. Shepard, 65, Retired Chairman of the
Executive Board and Chief Executive Officer of
AEGON N.V. (insurance) (2007)
Lorene K. Steffes, 66, Independent Business Advisor
(technology and technical services) (2000)
Dennis F. Strigl, 65, Retired President and Chief
Operating Officer of Verizon Communications Inc.
(telecommunications) (2001)
Thomas J. Usher, 69, Non-executive Chairman of
Marathon Petroleum Corporation (oil and gas
industry) (1992)
George H. Walls, Jr., 69, former Chief Deputy
Auditor for the State of North Carolina (2006)
Helge H. Wehmeier, 69, Retired Vice Chairman of
Bayer Corporation (healthcare, crop protection, and
chemicals) (1992)
PART II
ITEM 5 MARKET FOR REGISTRANTS COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
(a) (1) Our common stock is listed on the New York Stock
Exchange and is traded under the symbol PNC. At the close
of business on February 17, 2012, there were 77,045 common
shareholders of record.
Holders of PNC common stock are entitled to receive dividends
when declared by the Board of Directors out of funds legally
available for this purpose. Our Board of Directors may not pay
or set apart dividends on the common stock until dividends for
all past dividend periods on any series of outstanding preferred
stock have been paid or declared and set apart for payment. The
Board presently intends to continue the policy of paying
quarterly cash dividends. The amount of any future dividends
will depend on economic and market conditions, our financial
condition and operating results, and other factors, including
contractual restrictions and applicable government regulations
and policies (such as those relating to the ability of bank and
non-bank subsidiaries to pay dividends to the parent company
and regulatory capital limitations). Our ability to increase our
dividend is currently subject to the results of the Federal
Reserves 2012 Comprehensive Capital Analysis and Review
(CCAR) as part of its supervisory assessment of capital
adequacy described under Supervision and Regulation in
Item 1 of this Report.
The Federal Reserve has the power to prohibit us from paying
dividends without its approval. For further information
concerning dividend restrictions and restrictions on loans,
dividends or advances from bank subsidiaries to the parent
company, you may review Supervision and Regulation in
Item 1 of this Report, Funding and Capital Sources in the
Consolidated Balance Sheet Review section, Liquidity Risk
Management in the Risk Management section, and Trust
Preferred Securities in the Off-Balance Sheet Arrangements
and VIEs section of Item 7 of this Report, and Note 13 Capital
Securities of Subsidiary Trusts and Perpetual Trust Securities
and Note 21 Regulatory Matters in the Notes To Consolidated
Financial Statements in Item 8 of this Report, which we
include here by reference.
We include here by reference additional information relating
to PNC common stock under the caption Common Stock
Prices/Dividends Declared in the Statistical Information
(Unaudited) section of Item 8 of this Report.
The PNC Financial Services Group, Inc. Form 10-K 25
We include here by reference the information regarding our
compensation plans under which PNC equity securities are
authorized for issuance as of December 31, 2011 in the table
(with introductory paragraph and notes) that appears in
Item 12 of this Report.
invested on January 1, 2007 for the five-year period and that
any dividends were reinvested. The table below the graph
shows the resultant compound annual growth rate for the
performance period.
Comparison of Cumulative Five Year Total Return

Our registrar, stock transfer agent, and dividend disbursing 200

agent is:
Computershare Trust Company, N.A.
150
250 Royall Street
Canton, MA 02021

Dollars
800-982-7652 100

We include here by reference the information that appears

under the caption Common Stock Performance Graph at the 50

end of this Item 5.

PNC S&P 500 Index S&P 500 Banks Peer Group
0
(a) (2) None. Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11

(b) Not applicable. Assumes $100 investment at Close of 5-Year

Market on December 31, 2006 Compound
Base Total Return = Price change plus reinvestment Growth
(c) Details of our repurchases of PNC common stock during the Period of dividends Rate
fourth quarter of 2011 are included in the following table: Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11
PNC 100 91.71 71.37 78.70 91.14 88.35 (2.45)%
In thousands, except per share data
Maximum S&P 500 Index 100 105.49 66.46 84.05 96.71 98.76 (0.25)%
Total shares number of S&P 500 Banks 100 70.22 36.87 34.44 41.27 36.89 (18.08)%
purchased as shares that
Average part of may yet be Peer Group 100 76.73 43.02 57.56 72.45 59.35 (9.91)%
Total shares price publicly purchased
purchased paid per announced under the
2011 period (a) share programs (b) programs (b)
October 1 31 133 $52.03 24,710
The Peer Group for the preceding chart and table consists of
November 1 30 4 $55.51 24,710 the following companies: BB&T Corporation; Comerica Inc.;
December 1 31 1 $57.86 24,710 Fifth Third Bancorp; KeyCorp; The PNC Financial Services
Total 138 $52.16 Group, Inc.; SunTrust Banks, Inc.; U.S. Bancorp; Regions
(a) Reflects PNC common stock purchased in connection with our various employee Financial Corporation; Wells Fargo & Company; Capital One
benefit plans. No shares were purchased under the program referred to in note (b) to Financial, Inc.; Bank of America Corporation; M&T Bank;
this table during the fourth quarter of 2011. Effective January 2011, employer
matching contributions to the PNC Incentive Savings Plan are no longer made in and JP Morgan Chase and Company. This Peer Group was
PNC common stock, but rather in cash. Note 14 Employee Benefit Plans and Note approved by the Boards Personnel and Compensation
15 Stock Based Compensation Plans in the Notes To Consolidated Financial
Statements in Item 8 of this Report include additional information regarding our Committee (the Committee) for 2011. The Committee has
employee benefit plans that use PNC common stock. approved the same Peer Group for 2012.
(b) Our current stock repurchase program allows us to purchase up to 25 million shares
on the open market or in privately negotiated transactions. This program was
authorized on October 4, 2007 and will remain in effect until fully utilized or until Each yearly point for the Peer Group is determined by
modified, superseded or terminated. The extent and timing of share repurchases
under this program will depend on a number of factors including, among others, calculating the cumulative total shareholder return for each
market and general economic conditions, economic and regulatory capital company in the Peer Group from December 31, 2006 to
considerations, alternative uses of capital, the potential impact on our credit ratings,
and contractual and regulatory limitations, including the impact of the Federal
December 31 of that year (End of Month Dividend
Reserves current supervisory assessment of capital adequacy program. Reinvestment Assumed) and then using the median of these
returns as the yearly plot point.
COMMON STOCK PERFORMANCE GRAPH
This graph shows the cumulative total shareholder return (i.e., In accordance with the rules of the SEC, this section,
price change plus reinvestment of dividends) on our common captioned Common Stock Performance Graph, shall not be
stock during the five-year period ended December 31, 2011, incorporated by reference into any of our future filings made
as compared with: (1) a selected peer group of our under the Securities Exchange Act of 1934 or the Securities
competitors, called the Peer Group; (2) an overall stock Act of 1933. The Common Stock Performance Graph,
market index, the S&P 500 Index; and (3) a published industry including its accompanying table and footnotes, is not deemed
index, the S&P 500 Banks. The yearly points marked on the to be soliciting material or to be filed under the Exchange Act
horizontal axis of the graph correspond to December 31 of or the Securities Act.
that year. The stock performance graph assumes that $100 was

26 The PNC Financial Services Group, Inc. Form 10-K

ITEM 6 SELECTED FINANCIAL DATA
Year ended December 31
Dollars in millions, except per share data 2011 (a) 2010 (a) 2009 (a) 2008 2007
SUMMARY OF OPERATIONS
Interest income $ 10,194 $ 11,150 $ 12,086 $ 6,301 $ 6,144
Interest expense 1,494 1,920 3,003 2,447 3,197
Net interest income 8,700 9,230 9,083 3,854 2,947
Noninterest income (b) 5,626 5,946 7,145 2,442 2,944
Total revenue 14,326 15,176 16,228 6,296 5,891
Provision for credit losses (c) 1,152 2,502 3,930 1,517 315
Noninterest expense 9,105 8,613 9,073 3,685 3,652
Income from continuing operations before income taxes and
noncontrolling interests 4,069 4,061 3,225 1,094 1,924
Income taxes 998 1,037 867 298 561
Income from continuing operations before noncontrolling
interests 3,071 3,024 2,358 796 1,363
Income from discontinued operations (net of income taxes of
zero, $338, $54, $63 and $66) (d) 373 45 118 128
Net income 3,071 3,397 2,403 914 1,491
Less: Net income (loss) attributable to noncontrolling interests 15 (15) (44) 32 24
Preferred stock dividends (e) 56 146 388 21
Preferred stock discount accretion and redemptions (e) 2 255 56
Net income attributable to common shareholders (e) $ 2,998 $ 3,011 $ 2,003 $ 861 $ 1,467
PER COMMON SHARE
Basic earnings
Continuing operations $ 5.70 $ 5.08 $ 4.30 $ 2.15 $ 4.02
Discontinued operations (d) .72 .10 .34 .38
Net income $ 5.70 $ 5.80 $ 4.40 $ 2.49 $ 4.40
Diluted earnings
Continuing operations $ 5.64 $ 5.02 $ 4.26 $ 2.10 $ 3.94
Discontinued operations (d) .72 .10 .34 .38
Net income $ 5.64 $ 5.74 $ 4.36 $ 2.44 $ 4.32
Book value $ 61.52 $ 56.29 $ 47.68 $ 39.44 $ 43.60
Cash dividends declared $ 1.15 $ .40 $ .96 $ 2.61 $ 2.44
(a) Includes the impact of National City, which we acquired on December 31, 2008.
(b) Amount for 2009 includes recognition of a $1.1 billion pretax gain on our portion of the increase in BlackRocks equity resulting from the value of BlackRock shares issued in
connection with BlackRocks acquisition of Barclays Global Investors (BGI) on December 1, 2009.
(c) Amount for 2008 includes the $504 million conforming provision for credit losses related to our National City acquisition.
(d) Includes results of operations for GIS through June 30, 2010 and the related after-tax gain on sale. We sold GIS effective July 1, 2010, resulting in a gain of $639 million, or $328
million after taxes, recognized during the third quarter of 2010. See Sale of PNC Global Investment Servicing in the Executive Summary section of Item 7 and Note 2 Acquisition and
Divestiture Activity in the Notes To Consolidated Financial Statements included in Item 8 of this Report for additional information.
(e) We redeemed the Series N (TARP) Preferred Stock on February 10, 2010. In connection with the redemption, we accelerated the accretion of the remaining issuance discount on the
Series N Preferred Stock and recorded a corresponding reduction in retained earnings of $250 million in the first quarter of 2010. This resulted in a noncash reduction in net income
attributable to common shareholders and related basic and diluted earnings per share. The Series N Preferred Stock was issued on December 31, 2008.

Certain prior period amounts have been reclassified to conform with the current period presentation, which we believe is more
meaningful to readers of our consolidated financial statements.

For information regarding certain business, regulatory and legal risks, see Item 1A Risk Factors and the Risk Management section
of Item 7 of this Report, and Note 22 Legal Proceedings and Note 23 Commitments and Guarantees in the Notes To Consolidated
Financial Statements included in Item 8 of this Report for additional information. Also, see the Cautionary Statement Regarding
Forward-Looking Information and Critical Accounting Estimates And Judgments sections included in Item 7 of this Report for
certain other factors that could cause actual results or future events to differ, perhaps materially, from historical performance and
from those anticipated in the forward-looking statements included in this Report. See also the Executive Summary section in
Item 7 of this Report for additional information affecting financial performance.

The PNC Financial Services Group, Inc. Form 10-K 27

 At or for the year ended December 31
Dollars in millions, except as noted 2011 (a) 2010 (a) 2009 (a) 2008 (b) 2007
BALANCE SHEET HIGHLIGHTS
Assets $271,205 $264,284 $269,863 $291,081 $138,920
Loans 159,014 150,595 157,543 175,489 68,319
Allowance for loan and lease losses 4,347 4,887 5,072 3,917 830
Interest-earning deposits with banks 1,169 1,610 4,488 14,859 346
Investment securities 60,634 64,262 56,027 43,473 30,225
Loans held for sale 2,936 3,492 2,539 4,366 3,927
Goodwill and other intangible assets 10,144 10,753 12,909 11,688 9,551
Equity investments 10,134 9,220 10,254 8,554 6,045
Noninterest-bearing deposits 59,048 50,019 44,384 37,148 19,440
Interest-bearing deposits 128,918 133,371 142,538 155,717 63,256
Total deposits 187,966 183,390 186,922 192,865 82,696
Transaction deposits (c) 147,637 134,654 126,244 110,997 53,672
Borrowed funds (d) 36,704 39,488 39,261 52,240 30,931
Total shareholders equity 34,053 30,242 29,942 25,422 14,854
Common shareholders equity 32,417 29,596 22,011 17,490 14,847
CLIENT ASSETS (billions)
Discretionary assets under management $ 107 $ 108 $ 103 $ 103 $ 74
Nondiscretionary assets under management 103 104 102 125 112
Total assets under administration 210 212 205 228 186
Brokerage account assets (e) 34 34 32 29 19
Total client assets $ 244 $ 246 $ 237 $ 257 $ 205
SELECTED RATIOS
Net interest margin (f) 3.92% 4.14% 3.82% 3.37% 3.00%
Noninterest income to total revenue 39 39 44 39 50
Efficiency 64 57 56 59 62
Return on
Average common shareholders equity 9.56 10.88 9.78 6.52 10.70
Average assets 1.16 1.28 .87 .64 1.21
Loans to deposits 85 82 84 91 83
Dividend payout 20.2 6.8 21.4 104.6 55.0
Tier 1 common 10.3 9.8 6.0 4.8 5.4
Tier 1 risk-based 12.6 12.1 11.4 9.7 6.8
Common shareholders equity to total assets 12.0 11.2 8.2 6.0 10.7
Average common shareholders equity to average assets 11.9 10.4 7.2 9.6 11.3
SELECTED STATISTICS
Employees 51,891 50,769 55,820 59,595 28,320
Retail Banking branches 2,511 2,470 2,513 2,581 1,102
ATMs 6,806 6,673 6,473 6,233 3,900
Residential mortgage servicing portfolio (billions) $ 131 $ 139 $ 158 $ 187
Commercial mortgage servicing portfolio (billions) $ 267 $ 266 $ 287 $ 270 $ 243
(a) Includes the impact of National City, which we acquired on December 31, 2008.
(b) Includes the impact of National City except for the following Selected Ratios: Net Interest Margin, Noninterest income to total revenue, Efficiency, Return on Average common
shareholders equity, Return on Average assets, Dividend payout, and Average common shareholders equity to average assets.
(c) Represents the sum of interest-bearing money market deposits, interest-bearing demand deposits, and noninterest-bearing deposits.
(d) Includes long-term borrowings of $20.9 billion, $24.8 billion, $26.3 billion, $33.6 billion, and $12.6 billion for 2011, 2010, 2009, 2008 and 2007, respectively. Borrowings which
mature more than one year after December 31, 2011 are considered to be long-term.
(e) Amounts for 2011 and 2010 include cash and money market balances.
(f) Calculated as taxable-equivalent net interest income divided by average earning assets. The interest income earned on certain earning assets is completely or partially exempt from
federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest margins for
all earning assets, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets to make it
fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under accounting principles generally accepted in the United States of America
(GAAP) on the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the years 2011, 2010, 2009, 2008 and 2007 were $104 million, $81
million, $65 million, $36 million and $27 million, respectively.

28 The PNC Financial Services Group, Inc. Form 10-K

ITEM 7 MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EXECUTIVE SUMMARY
KEY STRATEGIC GOALS
We manage our company for the long term and focus on
operating within a moderate risk profile while maintaining
strong capital and liquidity positions, investing in our markets
and products, and embracing our corporate responsibility to
the communities where we do business. PNC operates under a
moderate risk profile which has been primarily attributable to
continued improvement in our credit profile as we have
experienced overall positive trends in a number of key
measures.
Our strategy to enhance shareholder value centers on driving
growth in pre-tax, pre-provision earnings by achieving growth
in revenue from our balance sheet and diverse business mix
that exceeds growth in expenses controlled through
disciplined cost management.
The primary drivers of revenue are the acquisition, expansion
and retention of customer relationships. We strive to expand
our customer base by offering convenient banking options and
leading technology solutions, providing a broad range of
fee-based and credit products and services, focusing on
customer service, and managing a significantly enhanced
branding initiative. This strategy is designed to give our
customers choices based on their needs. Rather than striving
to optimize fee revenue in the short term, our approach is
focused on effectively growing targeted market share and
share of wallet. We may also grow revenue through
appropriate and targeted acquisitions and, in certain
businesses, by expanding into new geographical markets.
We are focused on our strategies for quality growth. We
remain committed to maintaining a moderate risk philosophy
characterized by continued improvement in a number of key
measures, disciplined credit management, and the successful
execution and implementation of strategic business initiatives.
We have made substantial progress in transitioning our
balance sheet over the past two years, working to return to our
moderate risk profile throughout our expanded franchise. Our
actions have resulted in strong capital measures, created a
well-positioned balance sheet, and helped us to maintain
strong liquidity and investment flexibility to adjust, where
appropriate and permissible, to changing interest rates and
market conditions.
We also expect to build capital via retained earnings while
having opportunities to return capital to shareholders during
2012 subject to regulatory approvals. See the Funding and
Capital Sources section of the Consolidated Balance Sheet
Review section and the Liquidity Risk Management section of
this Item 7 and the Supervision and Regulation section in
Item 1 of this Report.
PENDING ACQUISITION OF RBC BANK (USA)
On June 19, 2011, PNC entered into a definitive agreement to
acquire RBC Bank (USA), the US retail banking subsidiary of
Royal Bank of Canada, with more than 400 branches in North
Carolina, Florida, Alabama, Georgia, Virginia and South
Carolina. The transaction is expected to add approximately
$18 billion of deposits and $16 billion of loans to PNCs
Consolidated Balance Sheet and to close in March 2012,
subject to remaining customary closing conditions. See Note 2
Acquisition and Divestiture Activity in the Notes To
Consolidated Financial Statements in Item 8 of this Report.
FLAGSTAR BRANCH ACQUISITION
Effective December 9, 2011, PNC acquired 27 branches in the
northern metropolitan Atlanta, Georgia area from Flagstar
Bank, FSB, a subsidiary of Flagstar Bancorp, Inc. We
assumed approximately $210.5 million of deposits associated
with these branches. No loans were acquired in the
transaction. Our Consolidated Income Statement includes the
impact of the branch activity subsequent to our December 9,
2011 acquisition. See Note 2 Acquisition and Divestiture
Activity in the Notes To Consolidated Financial Statements in
Item 8 of this Report.
BANKATLANTIC BRANCH ACQUISITION
Effective June 6, 2011, PNC acquired 19 branches in the
greater Tampa, Florida area from BankAtlantic, a subsidiary
of BankAtlantic Bancorp, Inc. We assumed approximately
$324.5 million of deposits associated with these branches. No
loans were acquired in the transaction. Our Consolidated
Income Statement includes the impact of the branch activity
subsequent to our June 6, 2011 acquisition. See Note 2
Acquisition and Divestiture Activity in the Notes To
Consolidated Financial Statements in Item 8 of this Report.
SALE OF PNC GLOBAL INVESTMENT SERVICING
On July 1, 2010, we sold PNC Global Investment Servicing
Inc. (GIS), a leading provider of processing, technology and
business intelligence services to asset managers, broker-
dealers and financial advisors worldwide, for $2.3 billion in
cash. The pretax gain in discontinued operations recorded in
the third quarter of 2010 related to this sale was $639 million,
net of transaction costs, or $328 million after taxes.
Results of operations of GIS through June 30, 2010 are
presented as income from discontinued operations, net of
income taxes, on our Consolidated Income Statement in this
Report. Once we entered into the sales agreement, GIS was no
longer a reportable business segment. See Note 2 Acquisition
and Divestiture Activity in the Notes To Consolidated
Financial Statements in Item 8 of this Report.
The PNC Financial Services Group, Inc. Form 10-K 29
CAPITAL AND LIQUIDITY ACTIONS
Our ability to take certain capital actions, including plans to pay
or increase common stock dividends or to repurchase shares
under current or future programs, is subject to the results of the
supervisory assessment of capital adequacy undertaken by the
Board of Governors of the Federal Reserve System (Federal
Reserve) and our primary bank regulators as part of the
Comprehensive Capital Analysis and Review (CCAR) process.
This capital adequacy assessment is based on a review of a
comprehensive capital plan submitted to the Federal Reserve. In
connection with the annual review process for 2012 (2012
CCAR), PNC filed its capital plan with the Federal Reserve on
January 9, 2012. PNC expects to receive its results under the
2012 CCAR from the Federal Reserve by the end of the first
quarter 2012. For additional information concerning the CCAR
process and the factors the Federal Reserve takes into
consideration in evaluating capital plans, see Item 1 Business
Supervision and Regulation of this Report.
A summary of 2011 capital and liquidity actions follows.
On April 7, 2011, consistent with our capital plan submitted to
the Federal Reserve earlier in 2011, our Board of Directors
approved an increase to PNCs quarterly common stock
dividend from $.10 per common share to $.35 per common
share. That capital plan also included plans to repurchase,
during the remainder of 2011, up to $500 million of common
stock in open market or privately negotiated transactions
under our existing share repurchase program; however, we
placed those plans on hold pending regulatory approval for the
RBC Bank (USA) acquisition and did not repurchase any PNC
common shares under the program during 2011. As noted
above, 2012 capital actions, including dividends and
repurchase plans, are subject to the results of the 2012 CCAR
review process. The discussion of capital within the
Consolidated Balance Sheet Review section of this Item 7
includes additional information regarding our common stock
repurchase program.
After entering into the acquisition agreement for RBC Bank
(USA) in June 2011, we submitted an updated capital plan
reflecting the proposed acquisition of RBC Bank (USA) to the
Federal Reserve for review and approval. We announced on
November 29, 2011, that PNC had been notified that the
Federal Reserve had no objections to the proposed revisions to
the capital actions submitted by PNC as they pertain to the
acquisition of RBC Bank (USA). Accordingly, we do not plan
to issue any shares of PNC common stock as part of the
consideration payable to the seller at closing. On
December 27, 2011 we announced that the Federal Reserve
approved our acquisition of RBC Bank (USA) and that the
OCC approved the merger of RBC Bank (USA) with and into
PNC Bank, N.A., which is planned to occur immediately
following PNCs acquisition of RBC Bank (USA). The
closing of these transactions is scheduled for March 2012,
subject to remaining customary closing conditions.
30 The PNC Financial Services Group, Inc. Form 10-K
On July 27, 2011, we issued one million depositary shares,
each representing a 1/100th interest in a share of our
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred
Stock, Series O, in an underwritten public offering resulting in
gross proceeds of $1 billion to us before commissions and
expenses. We intend to use the net proceeds from this offering
for general corporate purposes, including funding for the
pending RBC Bank (USA) acquisition.
On September 19, 2011, PNC Funding Corp issued $1.25
billion of senior notes due September 2016. Interest is paid
semi-annually at a fixed rate of 2.70%. The offering resulted
in gross proceeds to us before offering related expenses of
$1.24 billion. We intend to use the net proceeds from this
offering for general corporate purposes, including funding for
the pending RBC Bank (USA) acquisition.
On November 15, 2011, we redeemed $750 million of trust
preferred securities issued by National City Capital Trust II
with a current distribution rate of 6.625% and an original
scheduled maturity date of November 15, 2036. The
redemption price was $25 per trust preferred security plus any
accrued and unpaid distributions to the redemption date of
November 15, 2011. The redemption resulted in a noncash
charge for the unamortized discount of $198 million in the
fourth quarter of 2011.
RECENT MARKET AND INDUSTRY DEVELOPMENTS
There have been numerous legislative and regulatory
developments and dramatic changes in the competitive
landscape of our industry over the last several years.
The United States and other governments have undertaken
major reform of the regulation of the financial services
industry, including engaging in new efforts to impose
requirements designed to strengthen the stability of the
financial system and protect consumers and investors from
financial abuse. We expect to face further increased regulation
of our industry as a result of current and future initiatives
intended to provide economic stimulus, financial market
stability and enhanced regulation of financial services
companies and to enhance the liquidity and solvency of
financial institutions and markets. We also expect in many
cases more intense scrutiny from our bank supervisors in the
examination process and more aggressive enforcement of
regulations on both the federal and state levels. Compliance
with new regulations will increase our costs and reduce our
revenue. Some new regulations may limit our ability to pursue
certain desirable business opportunities.
The Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank), enacted in July 2010, mandates
the most wide-ranging overhaul of financial industry
regulation in decades. Many parts of the law are now in effect
and others are now in the implementation stage, which is
likely to continue for several years.
Until such time as the regulatory agencies issue final
regulations implementing all of the numerous provisions of
Dodd-Frank, PNC will not be able to fully assess the impact
the legislation will have on its businesses. However, we
believe that the expected changes will be manageable for PNC
and will have a smaller impact on us than on our larger peers.
Included in these recent legislative and regulatory
developments are evolving regulatory capital standards for
financial institutions. Dodd-Frank requires the Federal
Reserve Board to establish capital requirements that would,
among other things, eliminate the Tier 1 treatment of trust
preferred securities following a phase-in period expected to
begin in 2013. Evolving standards also include the so-called
Basel III initiatives that are part of the effort by
international banking supervisors to improve the ability of the
banking sector to absorb shocks in periods of financial and
economic stress and changes by the federal banking agencies
to reduce the use of credit ratings in the rules governing
regulatory capital. The recent Basel III capital initiative,
which has the support of US banking regulators, includes
heightened capital requirements for major banking institutions
in terms of both higher quality capital and higher regulatory
capital ratios. Basel III capital standards require implementing
regulations and standards by the banking regulators. Under the
Basel III accord, the new Basel III capital standards will
become effective under a phase-in period beginning January 1,
2013 and will be in full effect January 1, 2019.
A number of reform provisions are likely to significantly
impact the ways in which banks and bank holding companies,
including PNC, do business. We provide additional
information on a number of these provisions (including new
regulatory agencies (such as the Consumer Financial
Protection Bureau (CFPB)), consumer protection regulation,
enhanced capital requirements, limitations on investment in
and sponsorship of funds, risk retention by securitization
participants, new regulation of derivatives, potential
applicability of state consumer protection laws, and
limitations on interchange fees) and some of their potential
impacts on PNC in Item 1 BusinessSupervision and
Regulation and Item 1A Risk Factors of this Report.
RESIDENTIAL MORTGAGE MATTERS
Beginning in the third quarter of 2010, mortgage foreclosure
documentation practices among US financial institutions
received heightened attention by regulators and the media.
PNCs US market share for residential servicing is
approximately 1.4% according to the National Mortgage
News. The vast majority of our servicing business is on behalf
of other investors, principally the Federal Home Loan
Mortgage Corporation (FHLMC) and the Federal National
Mortgage Association (FNMA).
Similar to other banks, however, we identified issues
regarding some of our foreclosure practices. Accordingly,
after implementing a delay in pursuing individual
foreclosures, we have been moving forward in most
jurisdictions on such matters under procedures designed to
address as appropriate any documentation issues. We are also
proceeding with new foreclosures under enhanced procedures
designed as part of this review to minimize the risk of errors
related to the processing of documentation in foreclosure
cases.
There have been, and continue to be, numerous governmental,
legislative and regulatory inquiries and investigations on this
topic and other issues related to mortgage lending and
servicing. These inquiries and investigations may result in
significant additional actions, penalties or other remedies.
For additional information, including with respect to some of
the governmental, legislative and regulatory inquiries and
investigations, please see Risk Factors in Item 1A of this
Report, and Note 22 Legal Proceedings and Note 23
Commitments and Guarantees in the Notes To Consolidated
Financial Statements in Item 8 of this Report.
PNCS PARTICIPATION IN SELECT GOVERNMENT PROGRAMS
TARP Capital Purchase Program
We redeemed the Series N (TARP) Preferred Stock on
February 10, 2010. In connection with the redemption, we
accelerated the accretion of the remaining issuance discount
on the Series N Preferred Stock and recorded a corresponding
reduction in retained earnings of $250 million in the first
quarter of 2010. This resulted in a one-time, noncash
reduction in net income attributable to common shareholders
and related basic and diluted earnings per share. See
Repurchase of Outstanding TARP Preferred Stock and Sale by
US Treasury of TARP Warrant in Note 18 Equity in the Notes
To Consolidated Financial Statements in Part II, Item 8 of this
Report for additional information.
FDIC Temporary Liquidity Guarantee Program (TLGP)
The FDICs TLGP is designed to strengthen confidence and
encourage liquidity in the banking system by:
Guaranteeing newly issued senior unsecured debt of
eligible institutions, including FDIC-insured banks
and thrifts, as well as certain holding companies
(TLGP-Debt Guarantee Program), and
Providing full deposit insurance coverage for
non-interest bearing transaction accounts in FDIC-
insured institutions, regardless of the dollar amount
(TLGP-Transaction Account Guarantee Program).
PNC did not issue any securities under the TLGP-Debt
Guarantee Program during 2011.
In December 2008, PNC Funding Corp issued fixed and
floating rate senior notes totaling $2.9 billion under the
FDICs TLGP-Debt Guarantee Program. In March 2009, PNC
Funding Corp issued floating rate senior notes totaling $1.0
billion under this program. Each of these series of senior notes
is guaranteed through maturity by the FDIC.
The PNC Financial Services Group, Inc. Form 10-K 31
From October 14, 2008 through December 31, 2009, PNC
Bank, National Association (PNC Bank, N.A.) participated in
the TLGP-Transaction Account Guarantee Program. Under
this program, all non-interest bearing transaction accounts
were fully guaranteed by the FDIC for the entire amount in the
account.
Beginning January 1, 2010, PNC Bank, N.A. ceased
participating in the FDICs TLGP-Transaction Account
Guarantee Program. Dodd-Frank, however, extended for two
years, beginning December 31, 2010, unlimited deposit
insurance coverage for non-interest bearing transaction
accounts held at all banks. Therefore, eligible accounts at PNC
Bank, N.A. are again eligible for unlimited deposit insurance,
through December 31, 2012. Coverage under this extension is
in addition to, and separate from, the coverage available under
the FDICs general deposit insurance rules.
Home Affordable Modification Program (HAMP)
As part of its effort to stabilize the US housing market, in
March 2009 the Obama Administration published detailed
guidelines implementing HAMP, and authorized servicers to
begin loan modifications. PNC began participating in HAMP
through its then subsidiary National City Bank in May 2009
and directly through PNC Bank, N.A. in July 2009, and
entered into an agreement on October 1, 2010 to participate in
the Second Lien Program. HAMP was scheduled to terminate
as of December 31, 2012; however, the Administration has
announced that the HAMP program deadline will be extended
to December 31, 2013.
Home Affordable Refinance Program (HARP)
Another part of its efforts to stabilize the US housing market
is the Obama Administrations Home Affordable Refinance
Program (HARP), which provided a means for certain
borrowers to refinance their mortgage loans. PNC began
participating in HARP in May 2009. In 2011, the Obama
Administration revised the program to increase borrower
eligibility and extended it for another twelve months with a
new termination date of December 31, 2013.
KEY FACTORS AFFECTING FINANCIAL PERFORMANCE
Our financial performance is substantially affected by a
number of external factors outside of our control, including
the following:
General economic conditions, including the
continuity, speed and stamina of the moderate
economic recovery in general and on our customers
in particular,
The level of, and direction, timing and magnitude of
movement in, interest rates and the shape of the
interest rate yield curve,
The functioning and other performance of, and
availability of liquidity in, the capital and other
financial markets,
Loan demand, utilization of credit commitments and
standby letters of credit, and asset quality,
32 The PNC Financial Services Group, Inc. Form 10-K
Customer demand for non-loan products and
services,
Changes in the competitive and regulatory landscape
and in counterparty creditworthiness and
performance as the financial services industry
restructures in the current environment,
The impact of the extensive reforms enacted in the
Dodd-Frank legislation and other legislative,
regulatory and administrative initiatives, including
those outlined elsewhere in this Report, and
The impact of market credit spreads on asset
valuations.
In addition, our success will depend, among other things,
upon:
Further success in the acquisition, growth and
retention of customers,
Continued development of the geographic markets
related to our recent acquisitions, including full
deployment of our product offerings,
Closing the pending RBC Bank (USA) acquisition
and integrating its business into PNC after closing,
Revenue growth and our ability to provide innovative
and valued products to our customers,
Our ability to utilize technology to develop and
deliver products and services to our customers,
Our ability to manage and implement strategic
business objectives within the changing regulatory
environment,
A sustained focus on expense management,
Managing the non-strategic assets portfolio and
impaired assets,
Improving our overall asset quality and continuing to
meet evolving regulatory capital standards,
Continuing to maintain and grow our deposit base as
a low-cost funding source,
Prudent risk and capital management related to our
efforts to maintain our desired moderate risk profile,
Actions we take within the capital and other financial
markets, and
The impact of legal and regulatory contingencies.
For additional information, please see Risk Factors in Item 1A
of this Report and the Cautionary Statement Regarding
Forward-Looking Information section in this Item 7.
SUMMARY FINANCIAL RESULTS
Year ended December 31 2011 2010
Net income (millions) $3,071 $3,397
Diluted earnings per common share
Continuing operations $ 5.64 $ 5.02
Discontinued operations .72
Net income $ 5.64 $ 5.74
Return from net income on:
Average common shareholders equity 9.56% 10.88%
Average assets 1.16% 1.28%
Our performance in 2011 included the following:
Net income for 2011 of $3.1 billion was down 10%
from 2010. Results for 2011 included $324 million for
residential mortgage foreclosure-related expenses
primarily as a result of ongoing governmental matters
and a noncash charge of $198 million related to the
redemption of trust preferred securities. Results for
2010 included $71 million of residential mortgage-
related expenses, $328 million after-tax gain on our
sale of GIS, and integration expenses of $387 million,
whereas the comparable amount of integration
expenses for 2011 was $42 million. For 2010, net
income attributable to common shareholders and
diluted earnings per common share were impacted by
a noncash reduction of $250 million related to our
redemption of TARP preferred stock.
Net interest income of $8.7 billion for 2011 was
down 6% from 2010; net interest margin was down
to 3.92% in 2011 compared with 4.14% for 2010
primarily due to the impact of lower purchase
accounting accretion, a decline in average loan
balances and the low interest rate environment.
Noninterest income of $5.6 billion in 2011 declined
5% compared with 2010. Noninterest income for 2011
reflected higher asset management fees that were
offset by lower corporate service fees primarily due to
a reduction in the value of commercial mortgage
servicing rights and the impact of the rules set forth in
Regulation E. The fourth quarter impact of Dodd-
Frank on interchange revenue was offset by increased
customer-initiated volumes throughout 2011.
The provision for credit losses declined to $1.2
billion in 2011 compared with $2.5 billion in 2010 as
overall credit quality continued to improve due to
slowly improving economic conditions and actions
we took to reduce exposure levels during the year.
Noninterest expense for 2011 increased by 6%
compared with 2010, to $9.1 billion primarily due to
higher residential mortgage foreclosure-related
expenses and a charge for the unamortized discount
related to the redemption of trust preferred securities.
Overall credit quality continued to improve during
2011. Nonperforming assets declined $967 million,
or 19%, to $4.2 billion as of December 31, 2011 from
December 31, 2010. Accruing loans past due
increased $12 million, or less than 1%, during 2011
to $4.5 billion at year end primarily attributable to
government insured or guaranteed loans. The
allowance for loan and lease losses (ALLL) was $4.3
billion, or 2.73% of total loans and 122% of
nonperforming loans, as of December 31, 2011.
We remain committed to responsible lending to
support economic growth. Total loan originations and
new commitments and renewals totaled
approximately $147 billion for 2011, including $4.1
billion of small business loans. Total loans were
$159.0 billion at December 31, 2011, an increase of
6% from $150.6 billion at December 31, 2010. The
growth in total loans exceeded the $2.4 billion
decrease in Non-Strategic Assets Portfolio loans
driven by customer payment activity and portfolio
management activities to reduce under-performing
assets. Consolidated growth in commercial loans of
$10.5 billion, auto loans of $2.2 billion, and
education loans of $.4 billion was partially offset by
declines of $1.7 billion in commercial real estate
loans, $1.5 billion of residential real estate loans and
$1.1 billion of home equity loans compared with
December 31, 2010. The $3.2 billion decrease in
consolidated commercial and residential real estate
loans included $1.4 billion of Non-Strategic Assets
Portfolio loans, accounting for approximately 43% of
the consolidated decline.
Total deposits were $188.0 billion at December 31,
2011 compared with $183.4 billion at the prior year
end. Growth in transaction deposits (interest-bearing
money market, interest-bearing demand and
noninterest-bearing) continued with an increase of
$13 billion, or 10%, for the year. Retail certificates of
deposit were reduced by $7.8 billion, or 21%, during
2011 and deposit costs were 51 basis points, which
was 19 basis points lower than in 2010.
Our higher quality balance sheet during 2011
reflected core funding with a loans to deposits ratio
of 85% at year end and strong bank and holding
company liquidity positions to support growth.
We grew common shareholders equity by $2.8
billion during 2011. The Tier 1 common capital ratio
was 10.3% at December 31, 2011, up 50 basis points
from December 31, 2010.
Our Consolidated Income Statement Review section of this
Item 7 describes in greater detail the various items that
impacted our results for 2011 and 2010.
BALANCE SHEET HIGHLIGHTS
Total assets were $271.2 billion at December 31, 2011
compared with $264.3 billion at December 31, 2010. The
increase from year end 2010 resulted primarily from an
increase in loans and other assets somewhat offset by a
decrease in investment securities and short term investments.
Various seasonal and other factors impact our period-end
balances whereas average balances are generally more
indicative of underlying business trends apart from the impact
of acquisitions and divestitures. The Consolidated Balance
Sheet Review section of this Item 7 provides information on
changes in selected Consolidated Balance Sheet categories at
December 31, 2011 compared with December 31, 2010.
Total average assets were $265.3 billion for 2011 compared
with $264.9 billion for 2010. Average interest-earning assets
were $224.3 billion for 2011, compared with $224.7 billion in
2010. Both comparisons were primarily driven by a $1.8
The PNC Financial Services Group, Inc. Form 10-K 33
billion decrease in average total loans partially offset by a $1.7
billion increase in average total investment securities. The
overall decline in average loans reflected lower loan demand,
loan repayments, dispositions and net charge-offs. The
increase in total investment securities reflected net
investments of excess liquidity primarily in agency residential
mortgage-backed securities.
Total loans at December 31, 2011 increased $8.4 billion to
$159.0 billion compared with $150.6 billion at December 31,
2010. Average total loans decreased $1.8 billion or 1%, to
$152.0 billion, in 2011 compared with 2010 primarily as loan
growth during the second half of 2011 was offset by loan
decreases during the first half of 2011. The decrease in
average total loans primarily reflected declines in commercial
real estate of $3.7 billion and residential real estate of $2.8
billion, partially offset by a $5.1 billion increase in
commercial loans. Commercial real estate loans declined due
to loan sales, paydowns, and charge-offs. The decrease in
residential real estate was impacted by portfolio management
activities, paydowns and net charge-offs. Commercial loans
increased due to a combination of new client acquisition and
improved utilization. Loans represented 68% of average
interest-earning assets for 2011 and for 2010.
Average investment securities increased $1.7 billion, to $59.7
billion, in 2011 compared with 2010. Average securities held
to maturity increased $2.3 billion, to $9.4 billion, in 2011
compared with 2010. This increase was partially offset by the
decrease in average securities available for sale of $.6 billion,
to $50.3 billion, in 2011 compared with 2010. The increase in
average securities held to maturity was primarily a result of
transfers totalling $6.3 billion from securities available for
sale to securities held to maturity during the second and third
quarters of 2011.
Total investment securities comprised 27% of average
interest-earning assets for 2011 and 26% for 2010.
Average noninterest-earning assets totaled $41.0 billion in
2011 compared with $40.2 billion 2010.
Average total deposits were $183.0 billion for 2011 compared
with $181.9 billion for 2010. Average deposits remained
essentially flat from the prior year period primarily as a result
of decreases of $8.9 billion in average retail certificates of
deposit, $.4 billion in average other time deposits, and $.4
billion in average time deposits in foreign offices, which were
offset by increases of $6.6 billion in average noninterest-
bearing deposits, $2.5 billion in average interest-bearing
demand deposits and $1.2 billion in average savings deposits.
Total deposits at December 31, 2011 were $188.0 billion
compared with $183.4 billion at December 31, 2010 and are
further discussed within the Consolidated Balance Sheet
Review section of this Report.
34 The PNC Financial Services Group, Inc. Form 10-K
Average total deposits represented 69% of average total assets
for 2011 and 2010.
Average transaction deposits were $138.0 billion for 2011
compared with $128.4 billion for 2010. The continued
execution of the retail deposit strategy and customer
preference for liquidity contributed to the year-over-year
increase in average balances. In addition, commercial and
corporate deposit growth was very strong in 2011.
Average borrowed funds were $35.7 billion for 2011
compared with $40.2 billion for 2010. Maturities of Federal
Home Loan Bank (FHLB) borrowings drove the decline
compared to 2010. Total borrowed funds at December 31,
2011 were $36.7 billion compared with $39.5 billion at
December 31, 2010 and are further discussed within the
Consolidated Balance Sheet Review section of this Item 7. In
addition, the Liquidity Risk Management portion of the Risk
Management section of this Item 7 includes additional
information regarding our sources and uses of borrowed
funds.
BUSINESS SEGMENT HIGHLIGHTS
Highlights of results for 2011 and 2010 are included below.
As a result of its sale, GIS is no longer a reportable business
segment.
We refer you to Item 1 of this Report under the captions
Business Overview and Review of Business Segments for an
overview of our business segments and to the Business
Segments Review section of this Item 7 for a Results Of
Businesses Summary table and further analysis of business
segment results for 2011 and 2010, including presentation
differences from Note 25 Segment Reporting in the Notes To
Consolidated Financial Statements in Item 8 of this Report.
We provide a reconciliation of total business segment earnings
to PNC consolidated income from continuing operations
before noncontrolling interests as reported according to
accounting principles generally accepted in the United States
of America (GAAP) in Note 25 Segment Reporting in our
Notes To Consolidated Financial Statements of Item 8 of this
Report.
Retail Banking
Retail Banking earned $31 million for 2011 compared with
earnings of $144 million in 2010. Earnings declined from the
prior year as lower revenues from the impact of Regulation E
rules related to overdraft fees, a low interest rate environment,
and the regulatory impact of lower interchange fees on debit
card transactions, were partially offset by a lower provision
for credit losses and higher volumes of customer-initiated
transactions. Retail Banking continued to maintain its focus on
growing core customers, selectively investing in the business
for future growth, and disciplined expense management.
Corporate & Institutional Banking
Corporate & Institutional Banking earned $1.9 billion in 2011
and $1.8 billion in 2010. The increase in earnings was
primarily due to an improvement in the provision for credit
losses, which was a benefit in 2011, partially offset by a
reduction in the value of commercial mortgage servicing
rights and lower net interest income. We continued to focus on
adding new clients, increasing cross sales, and remaining
committed to strong expense discipline.
Asset Management Group
Asset Management Group earned $141 million for 2011
compared with $137 million for 2010. Assets under
administration were $210 billion at December 31, 2011 and
$212 billion at December 31, 2010. Earnings for 2011
reflected a benefit from the provision for credit losses and
growth in noninterest income, partially offset by higher
noninterest expense and lower net interest income. For 2011,
the business delivered strong sales production, grew high
value clients and benefitted from significant referrals from
other PNC lines of business. Over time and with stabilized
market conditions, the successful execution of these strategies
and the accumulation of our strong sales performance are
expected to create meaningful growth in assets under
management and noninterest income.
Residential Mortgage Banking
Residential Mortgage Banking earned $87 million in 2011
compared with $269 million in 2010. The decline in earnings
was driven by an increase in noninterest expense associated
with increased costs for residential mortgage foreclosure-
related expenses, primarily as a result of ongoing
governmental matters, and lower net interest income, partially
offset by an increase in loan originations and higher loans
sales revenue.
BlackRock
Our BlackRock business segment earned $361 million in 2011
and $351 million in 2010. The higher business segment
earnings from BlackRock for 2011 compared with 2010 were
primarily due to an increase in revenue.
Non-Strategic Assets Portfolio
This business segment (formerly Distressed Assets Portfolio)
consists primarily of acquired non-strategic assets that fall
outside of our core business strategy. Non-Strategic Assets
Portfolio had earnings of $200 million in 2011 compared with
a loss of $57 million in 2010. The increase was primarily
attributable to a lower provision for credit losses partially
offset by lower net interest income.
Other
Other reported earnings of $376 million for 2011 compared
with earnings of $386 million for 2010. The decrease in
earnings primarily reflected the noncash charge related to the
redemption of trust preferred securities in the fourth quarter of
2011 and the gain related to the sale of a portion of PNCs
BlackRock shares in 2010 partially offset by lower integration
costs in 2011.
CONSOLIDATED INCOME STATEMENT
REVIEW
Our Consolidated Income Statement is presented in Item 8 of
this Report.
Net income for 2011 was $3.1 billion compared with $3.4
billion for 2010. Results for 2011 include the impact of $324
million of residential mortgage foreclosure-related expenses
primarily as a result of ongoing governmental matters, a $198
million noncash charge related to redemption of trust
preferred securities and $42 million for integration costs.
Results for 2010 included the $328 million after-tax gain on
our sale of GIS, $387 million for integration costs, and $71
million of residential mortgage foreclosure-related expenses.
For 2010, net income attributable to common shareholders
was also impacted by a noncash reduction of $250 million in
connection with the redemption of TARP preferred stock.
PNCs results for 2011 were driven by good performance in a
challenging environment of low interest rates, slow economic
growth and new regulations.
NET INTEREST INCOME AND NET INTEREST MARGIN
Year ended December 31
Dollars in millions 2011 2010
Net interest income $8,700 $9,230
Net interest margin 3.92% 4.14%
Changes in net interest income and margin result from the
interaction of the volume and composition of interest-earning
assets and related yields, interest-bearing liabilities and related
rates paid, and noninterest-bearing sources of funding. See the
Statistical Information (Unaudited) Analysis Of
Year-To-Year Changes In Net Interest Income and Average
Consolidated Balance Sheet And Net Interest Analysis in
Item 8 and the discussion of purchase accounting accretion in
the Consolidated Balance Sheet Review in Item 7 of this
Report for additional information.
The decreases in net interest income and net interest margin
for 2011 compared with 2010 were primarily attributable to a
decrease in purchase accounting accretion on purchased
impaired loans primarily due to lower excess cash recoveries.
A decline in average loan balances and the low interest rate
environment, partially offset by lower funding costs, also
contributed to the decrease.
The PNC Financial Services Group, Inc. Form 10-K 35
The net interest margin was 3.92% for 2011 and 4.14% for
2010. The following factors impacted the comparison:
A 41 basis point decrease in the yield on interest-
earning assets. The yield on loans, the largest portion
of our earning assets, decreased 38 basis points.
These factors were partially offset by a 20 basis point
decline in the rate accrued on interest-bearing
liabilities. The rate accrued on interest-bearing
deposits, the largest component, decreased 19 basis
points primarily in retail certificates of deposit.
We expect our 2012 net interest income, including the results
of our pending RBC Bank (USA) acquisition following
closing, to increase in percentage terms by mid-to-high single
digits compared to 2011 as core net interest income should
continue to grow offset by the expected decline in purchase
accounting accretion, assuming the economic outlook for
2012 will be a continuation of the 2011 environment.
NONINTEREST INCOME
Noninterest income totaled $5.6 billion for 2011 and $5.9
billion for 2010. Noninterest income for 2011 reflected higher
asset management fees and other income, higher residential
mortgage banking revenue, and lower net other-than-
temporary impairments (OTTI), that were offset by a decrease
in corporate service fees primarily due to a reduction in the
value of commercial mortgage servicing rights, lower service
charges on deposits from the impact of Regulation E rules
pertaining to overdraft fees, a decrease in net gains on sales of
securities and lower consumer services fees due, in part, to a
decline in interchange fees on individual debit card
transactions in the fourth quarter partially offset by higher
transaction volumes throughout 2011.
Asset management revenue, including BlackRock, increased
$34 million to $1.1 billion in 2011 compared with 2010. The
increase was driven by strong sales performance by our Asset
Management Group and somewhat higher equity earnings
from our BlackRock investment. Discretionary assets under
management at December 31, 2011 totaled $107 billion
compared with $108 billion at December 31, 2010.
For 2011, consumer services fees totaled $1.2 billion
compared with $1.3 billion in 2010. The decrease was due to
lower interchange rates on debit card transactions, lower
brokerage related revenue, and lower ATM related fees,
partially offset by higher volumes of customer-initiated
transactions including debit and credit cards. As further
discussed in the Retail Banking section of the Business
Segments Review portion of this Item 7, the Dodd-Frank
limits on interchange rates were effective October 1, 2011 and
had a negative impact on revenues of approximately $75
million in the fourth quarter of 2011, and are expected to have
an additional incremental reduction on 2012 annual revenue of
approximately $175 million, based on 2011 transaction
volumes.
36 The PNC Financial Services Group, Inc. Form 10-K
Corporate services revenue totaled $.9 billion in 2011 and
$1.1 billion in 2010. Lower values of commercial mortgage
servicing rights, largely driven by lower interest rates and
higher loan prepayment rates, and lower special servicing fees
drove the decline.
Residential mortgage revenue totaled $713 million in 2011
and $699 million in 2010. Higher loans sales revenue drove
the comparison, largely offset by lower net hedging gains on
mortgage servicing rights and lower servicing fees.
Service charges on deposits totaled $534 million for 2011 and
$705 million for 2010. The decline resulted primarily from the
impact of Regulation E rules pertaining to overdraft fees. As
further discussed in the Retail Banking section of the Business
Segments Review portion of this Item 7, the new Regulation E
rules related to overdraft charges negatively impacted our
2011 revenue by approximately $200 million compared with
2010.
Net gains on sales of securities totaled $249 million for 2011
and $426 million for 2010. The net credit component of OTTI
of securities recognized in earnings was a loss of $152 million
in 2011, compared with a loss of $325 million in 2010.
Gains on BlackRock related transactions included a fourth
quarter 2010 pretax gain of $160 million from our sale of
7.5 million BlackRock common shares as part of a BlackRock
secondary common stock offering.
Other noninterest income totaled $1.1 billion for 2011
compared with $.9 billion for 2010.
The diversity of our revenue streams should enable us to
achieve a solid performance in an environment that will
continue to be affected by regulatory reform headwinds and
implementation challenges. Looking to 2012, we see
opportunities for growth as a result of our larger franchise and
the pending acquisition, our ability to cross-sell our products
and services to existing clients and our progress in adding new
clients. We expect noninterest income to increase in
percentage terms by the mid-single digits despite further
regulatory impacts on debit card interchange fees, assuming
the economic outlook for 2012 will be a continuation of the
2011 environment.
PRODUCT REVENUE
In addition to credit and deposit products for commercial
customers, Corporate & Institutional Banking offers other
services, including treasury management, capital markets-
related products and services, and commercial mortgage
banking activities for customers in all business segments. A
portion of the revenue and expense related to these products is
reflected in Corporate & Institutional Banking and the
remainder is reflected in the results of other businesses. The
Other Information section in the Corporate & Institutional
Banking table in the Business Segments Review section of
this Item 7 includes the consolidated revenue to PNC for these
services. A discussion of the consolidated revenue from these
services follows.
Treasury management revenue, which includes fees as well as
net interest income from customer deposit balances, totaled
$1.2 billion for both 2011 and 2010. Declining deposit spreads
were offset by increases in core processing products, such as
lockbox and information reporting, and in growth products
such as commercial card and healthcare related services.
Revenue from capital markets-related products and services
totaled $622 million in 2011 compared with $606 million in
2010. The comparison reflects higher derivatives and foreign
exchange sales and the reduced impact of counterparty credit
risk on valuations of derivative positions. These increases
were partially offset by lower underwriting activity.
Commercial mortgage banking activities resulted in revenue
of $112 million in 2011 compared with $262 million in 2010.
This decline was primarily due to a reduction in the value of
commercial mortgage servicing rights largely driven by lower
interest rates and higher loan prepayment rates. 2010 included
a higher level of ancillary commercial mortgage servicing fees
and revenue from a duplicative agency servicing operation
that was sold in that year.
Apart from the possible impact of legal and regulatory
contingencies, charges on further trust preferred redemptions,
and RBC Bank (USA) integration expenses in 2012, and
excluding the fourth quarter charge for residential mortgage
foreclosure-related expenses of $240 million and the noncash
charge of $198 million related to the trust preferred securities
redemption in 2011, we expect that total noninterest expense
for 2012 will increase in percentage terms by mid single-digits
compared to 2011. This expectation reflects flat-to-down
expense for PNC stand alone and 10 months of RBC Bank
(USA) operating expenses of approximately $600 million.
In connection with the pending acquisition of RBC Bank
(USA) in March 2012, we expect to incur total merger and
integration costs of approximately $170 million in the first
quarter of 2012.
EFFECTIVE INCOME TAX RATE
The effective income tax rate was 24.5% in 2011 compared
with 25.5% in 2010. The decrease in the effective tax rate was
primarily attributable to the impact of higher tax-exempt
income and tax credits.

PROVISION FOR CREDIT LOSSES

The provision for credit losses declined to $1.2 billion in 2011
compared with $2.5 billion in 2010 as overall credit quality
continued to improve due to improved economic conditions
and actions we took to reduce exposure levels during the year.

We expect our provision for credit losses in 2012 to remain

stable relative to 2011 assuming the economic outlook for
2012 will be a continuation of the 2011 environment. This
includes consideration of the impact of the pending RBC
Bank (USA) acquisition.

The Credit Risk Management portion of the Risk Management

section of this Item 7 includes additional information
regarding factors impacting the provision for credit losses. See
also Item 1A Risk Factors and the Cautionary Statement
Regarding Forward-Looking Information section of Item 7 of
this Report.

NONINTEREST EXPENSE
Noninterest expense was $9.1 billion for 2011 and $8.6 billion
for 2010. Noninterest expense for 2011 included $324 million
of residential mortgage foreclosure-related expenses primarily
as a result of ongoing governmental matters, a noncash charge
of $198 million for the unamortized discount related to
redemption of trust preferred securities, and $42 million for
integration costs. The comparable amounts for 2010 were $71
million, $0 and $387 million, respectively.

The PNC Financial Services Group, Inc. Form 10-K 37

CONSOLIDATED BALANCE SHEET REVIEW improved utilization. Auto loans increased due to the
expansion of sales force and product introduction to acquired
SUMMARIZED BALANCE SHEET DATA markets, as well as overall increases in auto sales. Education
loans increased due to portfolio purchases in 2011.
Dec. 31 Dec. 31
Commercial and residential real estate along with home equity
In millions 2011 2010 loans declined due to loan demand being outpaced by
Assets paydowns, refinancing, and charge-offs.
Loans $159,014 $150,595
Investment securities 60,634 64,262 Loans represented 59% of total assets at December 31, 2011
Cash and short-term investments 9,992 10,437 and 57% of total assets at December 31, 2010. Commercial
Loans held for sale 2,936 3,492 lending represented 56% of the loan portfolio at December 31,
Goodwill and other intangible assets 10,144 10,753 2011 and 53% at December 31, 2010. Consumer lending
Equity investments 10,134 9,220 represented 44% of the loan portfolio at December 31, 2011
and 47% at December 31, 2010.
Other, net 18,351 15,525
Total assets $271,205 $264,284
Commercial real estate loans represented 6% of total assets at
Liabilities
December 31, 2011 and 7% of total assets at December 31,
Deposits $187,966 $183,390
2010.
Borrowed funds 36,704 39,488
Other 9,289 8,568
Details Of Loans
Total liabilities 233,959 231,446
Total shareholders equity 34,053 30,242 Dec. 31 Dec. 31
Noncontrolling interests 3,193 2,596 In millions 2011 2010
Total equity 37,246 32,838 Commercial
Total liabilities and equity $271,205 $264,284 Retail/wholesale trade $ 11,539 $ 9,901
Manufacturing 11,453 9,334
The summarized balance sheet data above is based upon the Service providers 9,717 8,866
Consolidated Balance Sheet in Item 8 of this Report. Real estate related (a) 8,488 7,500
Financial services 6,646 4,573
The increase in total assets at December 31, 2011 compared Health care 5,068 3,481
with December 31, 2010 was primarily due to an increase in Other industries 12,783 11,522
loans and other assets, partially offset by a decrease in Total commercial 65,694 55,177
investment securities. Commercial real estate
Real estate projects 10,640 12,211
An analysis of changes in selected balance sheet categories Commercial mortgage 5,564 5,723
follows. Total commercial real estate 16,204 17,934
Equipment lease financing 6,416 6,393
LOANS TOTAL COMMERCIAL LENDING (b) 88,314 79,504
Outstanding loan balances of $159.0 billion at December 31,
Consumer
2011 and $150.6 billion at December 31, 2010 were net of
Home equity
unearned income, net deferred loan fees, unamortized
discounts and premiums, and purchase discounts and Lines of credit 22,491 23,473
premiums of $2.3 billion at December 31, 2011 and $2.7 Installment 10,598 10,753
billion at December 31, 2010, respectively. The balances do Residential real estate
not include future accretable net interest (i.e., the difference Residential mortgage 13,885 15,292
between the undiscounted expected cash flows and the Residential construction 584 707
carrying value of the loan) on purchased impaired loans. Credit card 3,976 3,920
Other consumer
Loans increased $8.4 billion as of December 31, 2011 Education 9,582 9,196
compared with December 31, 2010. Growth in commercial Automobile 5,181 2,983
loans of $10.5 billion, auto loans of $2.2 billion, and Other 4,403 4,767
education loans of $.4 billion was partially offset by declines TOTAL CONSUMER LENDING 70,700 71,091
of $1.7 billion in commercial real estate loans, $1.5 billion of
Total loans $159,014 $150,595
residential real estate loans and $1.1 billion of home equity
(a) Includes loans to customers in the real estate and construction industries.
loans compared with December 31, 2010. Commercial loans (b) Construction loans with interest reserves, and A/B Note restructurings are not
increased due to a combination of new client acquisition and significant to PNC.

38 The PNC Financial Services Group, Inc. Form 10-K

Total loans above include purchased impaired loans of $6.7 Total Purchase Accounting Accretion
billion, or 4% of total loans, at December 31, 2011, and $7.8
billion, or 5% of total loans, at December 31, 2010. Year ended December 31
In millions 2011 2010

Non-impaired loans $ 288 $ 366

We are committed to providing credit and liquidity to
qualified borrowers. Total loan originations and new Impaired loans
commitments and renewals totaled $147 billion for 2011. Scheduled accretion 666 885
Reversal of contractual interest on impaired
Our loan portfolio continued to be diversified among loans (395) (529)
numerous industries and types of businesses in our principal Scheduled accretion net of contractual
geographic markets. interest 271 356
Excess cash recoveries 254 483
Commercial lending is the largest category and is the most Total impaired loans 525 839
sensitive to changes in assumptions and judgments underlying
Securities 49 54
the determination of the allowance for loan and lease losses
(ALLL). This estimate also considers other relevant factors Deposits 358 545
such as: Borrowings (101) (155)
Industry concentrations and conditions, Total $1,119 $1,649
Recent credit quality trends,
Recent loss experience in particular portfolios,
Total Remaining Purchase Accounting Accretion
Recent macro economic factors,
Changes in risk selection and underwriting standards, Dec. 31 Dec. 31 Dec. 31
and In billions 2011 2010 2009

Timing of available information. Non-impaired loans $ .9 $ 1.2 $ 1.6

Impaired loans 2.1 2.2 3.5
Higher Risk Loans Total loans (gross) 3.0 3.4 5.1
Our loan portfolio includes certain loans deemed to be higher
Securities .4 .5 .5
risk. As of December 31, 2011, we established specific and
Deposits .1 .5 1.0
pooled reserves on the total commercial lending category of
$2.0 billion. This commercial lending reserve included what Borrowings (.8) (1.1) (1.2)
we believe to be appropriate loss coverage on the higher risk Total $2.7 $ 3.3 $ 5.4
commercial loans in the total commercial portfolio. The
commercial lending reserve represented 46% of the total Accretable Net Interest Purchased Impaired Loans
ALLL of $4.3 billion at that date. The remaining 54% of
ALLL pertained to the total consumer lending category, In billions
including loans with certain attributes that we would consider January 1, 2010 $3.5
to be higher risk. We do not consider government insured or
Accretion (.9)
guaranteed loans to be higher risk as defaults are materially
mitigated by payments of insurance or guarantee amounts for Excess cash recoveries (.5)
approved claims. Additional information regarding our higher Net reclassifications to accretable from non-accretable and
risk loans is included in Note 5 Asset Quality and Allowances other activity (a) .1
for Loan and Lease Losses and Unfunded Loan Commitments December 31, 2010 $2.2
and Letters of Credit in the Notes To Consolidated Financial Accretion (.7)
Statements included in Item 8 of this Report. Excess cash recoveries (.2)
Net reclassifications to accretable from non-accretable and
Purchase Accounting other activity (a) .8
Information related to purchased impaired loans, purchase
December 31, 2011 (b) $2.1
accounting accretion and accretable net interest recognized
(a) The net reclass includes the impact of improvements in the excess cash expected to
during 2011, 2010 and 2009 follows. be collected from credit improvements, as well as accretable differences related to
cash flow extensions.
(b) As of December 31, 2011, we estimate that the reversal of contractual interest on
purchased impaired loans will total approximately $1.4 billion. This will reduce the
benefit of purchase accounting accretion and offset the total net accretable interest
income of $2.1 billion on purchased impaired loans.

The PNC Financial Services Group, Inc. Form 10-K 39

Valuation of Purchased Impaired Loans

December 31, 2011 December 31, 2010 December 31, 2009

Dollars in billions Balance Net Investment Balance Net Investment Balance Net Investment
Commercial and commercial real estate loans:
Unpaid principal balance $ 1.0 $ 1.8 $ 3.5
Purchased impaired mark (.1) (.4) (1.3)
Recorded investment .9 1.4 2.2
Allowance for loan losses (.2) (.3) (.2)
Net investment .7 70% 1.1 61% 2.0 57%
Consumer and residential mortgage loans:
Unpaid principal balance 6.5 7.9 11.7
Purchased impaired mark (.7) (1.5) (3.6)
Recorded investment 5.8 6.4 8.1
Allowance for loan losses (.8) (.6) (.3)
Net investment 5.0 77% 5.8 73% 7.8 67%
Total purchased impaired loans:
Unpaid principal balance 7.5 9.7 15.2
Purchased impaired mark (.8) (1.9) (4.9)
Recorded investment 6.7 7.8 10.3
Allowance for loan losses (1.0) (.9) (.5)
Net investment $ 5.7 76% $ 6.9 71% $ 9.8 64%

The unpaid principal balance of purchased impaired loans Net unfunded credit commitments are comprised of the
declined from $9.7 billion at December 31, 2010 to $7.5 following:
billion at December 31, 2011 due to payments, disposals, and
charge-offs of amounts determined to be uncollectible. The Net Unfunded Credit Commitments
remaining purchased impaired mark at December 31, 2011
Dec. 31 Dec. 31
was $.8 billion, which was a decline from $1.9 billion at 2011 2010
December 31, 2010. The associated allowance for loan losses Commercial/commercial real estate (a) $ 64,955 $59,256
increased slightly by $.1 billion to $1.0 billion at Home equity lines of credit 18,317 19,172
December 31, 2011. The net investment of $6.9 billion at Credit card 16,216 14,725
December 31, 2010 declined 17% to $5.7 billion at Other 3,783 2,652
December 31, 2011. At December 31, 2011, our largest Total $103,271 $95,805
individual purchased impaired loan had a recorded investment (a) Less than 4% of these amounts at each date relate to commercial real estate.
of $25.2 million.
Commitments to extend credit represent arrangements to lend
We currently expect to collect total cash flows of $7.8 billion funds or provide liquidity subject to specified contractual
on purchased impaired loans, representing the $5.7 billion net conditions. Commercial commitments reported above exclude
investment at December 31, 2011 and the accretable net syndications, assignments and participations, primarily to
interest of $2.1 billion shown in the Accretable Net Interest- financial institutions, totaling $20.2 billion at December 31,
Purchased Impaired Loans table. These represent the net 2011 and $16.7 billion at December 31, 2010.
future cash flows on purchased impaired loans, as contractual
interest will be reversed. Unfunded liquidity facility commitments and standby bond
purchase agreements totaled $742 million at December 31,
2011 and $458 million at December 31, 2010 and are included
in the preceding table primarily within the Commercial /
commercial real estate category.

In addition to the credit commitments set forth in the table

above, our net outstanding standby letters of credit totaled
$10.8 billion at December 31, 2011 and $10.1 billion at
December 31, 2010. Standby letters of credit commit us to
make payments on behalf of our customers if specified future
events occur.

40 The PNC Financial Services Group, Inc. Form 10-K

INVESTMENT SECURITIES The carrying amount of investment securities totaled $60.6
billion at December 31, 2011, a decrease of $3.6 billion, or
Details of Investment Securities 6%, from $64.3 billion at December 31, 2010. The decline
resulted from principal payments and net sales activity related
Amortized Fair to US Treasury and government agency and non-agency
In millions Cost Value
residential mortgage-backed securities. Investment securities
December 31, 2011
represented 22% of total assets at December 31, 2011 and
SECURITIES AVAILABLE FOR SALE 24% of total assets at December 31, 2010.
Debt securities
US Treasury and government agencies $ 3,369 $ 3,717 We evaluate our portfolio of investment securities in light of
Residential mortgage-backed changing market conditions and other factors and, where
Agency 26,081 26,792 appropriate, take steps intended to improve our overall
Non-agency 6,673 5,557 positioning. We consider the portfolio to be well-diversified
Commercial mortgage-backed and of high quality. US Treasury and government agencies,
Agency 1,101 1,140 agency residential mortgage-backed securities and agency
Non-agency 2,693 2,756 commercial mortgage-backed securities collectively
Asset-backed 3,854 3,669 represented 63% of the investment securities portfolio at
State and municipal 1,779 1,807 December 31, 2011.
Other debt 2,691 2,762 During 2011, we transferred securities with a fair value of
Corporate stocks and other 368 368 $6.3 billion from available for sale to held to maturity. The
Total securities available for sale $48,609 $48,568 securities were reclassified at fair value at the time of transfer.
SECURITIES HELD TO MATURITY Accumulated other comprehensive income included net pretax
Debt securities unrealized gains of $183 million on the securities at transfer,
US Treasury and government agencies $ 221 $ 261 which are being accreted over the remaining life of the related
Residential mortgage-backed (agency) 4,761 4,891 securities as an adjustment of yield in a manner consistent
Commercial mortgage-backed with the amortization of the net premium on the same
transferred securities, resulting in no impact on net income.
Agency 1,332 1,382
Non-agency 3,467 3,573 At December 31, 2011, the securities available for sale
Asset-backed 1,251 1,262 portfolio included a net unrealized loss of $41 million, which
State and municipal 671 702 represented the difference between fair value and amortized
Other debt 363 379 cost. The comparable amount at December 31, 2010 was a net
Total securities held to maturity $12,066 $12,450 unrealized loss of $861 million. The fair value of investment
December 31, 2010 securities is impacted by interest rates, credit spreads, market
SECURITIES AVAILABLE FOR SALE volatility and liquidity conditions. The fair value of
investment securities generally decreases when interest rates
Debt securities
increase and vice versa. In addition, the fair value generally
US Treasury and government agencies $ 5,575 $ 5,710
decreases when credit spreads widen and vice versa.
Residential mortgage-backed
Agency 31,697 31,720 The improvement in the net unrealized pretax loss compared
Non-agency 8,193 7,233 with December 31, 2010 was primarily due to the effect of
Commercial mortgage-backed lower market interest rates. Net unrealized gains and losses in
Agency 1,763 1,797 the securities available for sale portfolio are included in
Non-agency 1,794 1,856 shareholders equity as accumulated other comprehensive
income or loss from continuing operations, net of tax.
Asset-backed 2,780 2,582
State and municipal 1,999 1,957 Unrealized gains and losses on available for sale securities do
Other debt 3,992 4,077 not impact liquidity or risk-based capital. However, reductions
Corporate stocks and other 378 378 in the credit ratings of these securities could have an impact
Total securities available for sale $58,171 $57,310 on the liquidity of the securities or the determination of risk-
SECURITIES HELD TO MATURITY weighted assets which could reduce our regulatory capital
Debt securities ratios. In addition, the amount representing the credit-related
Commercial mortgage-backed (non- portion of OTTI on available for sale securities would reduce
agency) $ 4,316 $ 4,490 our earnings and regulatory capital ratios.
Asset-backed 2,626 2,676
The expected weighted-average life of investment securities
Other debt 10 11 (excluding corporate stocks and other) was 3.7 years at
Total securities held to maturity $ 6,952 $ 7,177 December 31, 2011 and 4.7 years at December 31, 2010.

The PNC Financial Services Group, Inc. Form 10-K 41

We estimate that, at December 31, 2011, the effective duration of investment securities was 2.6 years for an immediate 50 basis
points parallel increase in interest rates and 2.4 years for an immediate 50 basis points parallel decrease in interest rates.
Comparable amounts at December 31, 2010 were 3.1 years and 2.9 years, respectively.

The following table provides detail regarding the vintage, current credit rating, and FICO score of the underlying collateral at
origination, where available, for residential mortgage-backed, commercial mortgage-backed and other asset-backed securities held
in the available for sale and held to maturity portfolios:
December 31, 2011
Agency Non-agency
Residential Commercial Residential Commercial
Mortgage- Mortgage- Mortgage- Mortgage- Asset-
Backed Backed Backed Backed Backed
Dollars in millions Securities Securities Securities Securities Securities
Fair Value Available for Sale $ 26,792 $ 1,140 $ 5,557 $ 2,756 $ 3,669
Fair Value Held to Maturity 4,891 1,382 3,573 1,262
Total Fair Value $ 31,683 $ 2,522 $ 5,557 $ 6,329 $ 4,931
% of Fair Value:
By Vintage
2011 28% 46% 4%
2010 33% 19% 4% 6%
2009 13% 18% 3% 10%
2008 4% 2% 4%
2007 5% 1% 18% 10% 6%
2006 2% 3% 24% 26% 8%
2005 and earlier 9% 10% 58% 52% 10%
Not Available 6% 1% 1% 56%
Total 100% 100% 100% 100% 100%

By Credit Rating (at December 31, 2011)

Agency 100% 100%
AAA 2% 78% 65%
AA 1% 6% 17%
A 3% 9% 1%
BBB 5% 4%
BB 5% 1%
B 7% 2%
Lower than B 76% 12%
No rating 1% 2% 3%
Total 100% 100% 100% 100% 100%

By FICO Score (at origination)

>720 55% 3%
<720 and >660 35% 8%
<660 1% 2%
No FICO score 9% 87%
Total 100% 100%

We conduct a comprehensive security-level impairment by a cross-functional senior management team representing

assessment quarterly on all securities in an unrealized loss
position to determine whether the loss represents OTTI. Our
assessment considers the security structure, recent security
collateral performance metrics, external credit ratings, failure
of the issuer to make scheduled interest or principal payments,
our judgment and expectations of future performance, and
relevant independent industry research, analysis and forecasts.
We also consider the severity of the impairment in our
assessment. Results of the periodic assessment are reviewed
Asset & Liability Management, Finance, and Market Risk
Management. The senior management team considers the
results of the assessments, as well as other factors, in
determining whether the impairment is other-than-temporary.
We recognize the credit portion of OTTI charges in current
earnings for those debt securities where we do not intend to
sell and believe we will not be required to sell the securities
prior to expected recovery. The noncredit portion of OTTI is
included in accumulated other comprehensive loss.

42 The PNC Financial Services Group, Inc. Form 10-K

We recognized OTTI for 2011 and 2010 as follows:

Other-Than-Temporary Impairments
Year ended December 31
In millions 2011 2010
Credit portion of OTTI losses (a)
Non-agency residential mortgage-backed $(130) $(242)
Non-agency commercial mortgage-backed (5)
Asset-backed (21) (78)
Other debt (1)
Total credit portion of OTTI losses (152) (325)
Noncredit portion of OTTI losses (b) (268) (283)
Total OTTI losses $(420) $(608)
(a) Reduction of noninterest income in our Consolidated Income Statement.
(b) Included in accumulated other comprehensive loss, net of tax, on our Consolidated
Balance Sheet.

The following table summarizes net unrealized gains and losses recorded on non-agency residential and commercial mortgage-
backed and other asset-backed securities, which represent our most significant categories of securities not backed by the US
government or its agencies. A summary of all OTTI credit losses recognized for 2011 by investment type is included in Note 7
Investment Securities in the Notes To Consolidated Financial Statements in Item 8 of this Report.
December 31, 2011
Residential Mortgage- Commercial Mortgage- Asset-Backed
In millions Backed Securities Backed Securities Securities (a)
Available for Sale Securities (Non-Agency)
Net Net Net
Unrealized Unrealized Unrealized
Fair Gain Fair Gain Fair Gain
Value (Loss) Value (Loss) Value (Loss)
Credit Rating Analysis
AAA $ 97 $ (1) $1,586 $ 47 $2,253
Other Investment Grade (AA, A, BBB) 509 (35) 979 23 713 $ (13)
Total Investment Grade 606 (36) 2,565 70 2,966 (13)
BB 303 (27) 85 (8)
B 403 (48) 107 (7)
Lower than B 4,210 (1,005) 568 (148)
Total Sub-Investment Grade 4,916 (1,080) 85 (8) 675 (155)
Total No Rating 35 106 1 25 (17)
Total $5,557 $(1,116) $2,756 $ 63 $3,666 $(185)
OTTI Analysis
Investment Grade:
OTTI has been recognized
No OTTI recognized to date $ 606 $ (36) $2,565 $ 70 $2,966 $ (13)
Total Investment Grade 606 (36) 2,565 70 2,966 (13)
Sub-Investment Grade:
OTTI has been recognized 3,417 (987) 548 (168)
No OTTI recognized to date 1,499 (93) 85 (8) 127 13
Total Sub-Investment Grade 4,916 (1,080) 85 (8) 675 (155)
No Rating:
OTTI has been recognized 25 (17)
No OTTI recognized to date 35 106 1
Total No Rating 35 106 1 25 (17)
Total $5,557 $(1,116) $2,756 $ 63 $3,666 $(185)
Securities Held to Maturity (Non-Agency)
Credit Rating Analysis
AAA $3,364 $ 99 $ 931 $ 9
Other Investment Grade (AA, A, BBB) 209 7 219 (2)
Total Investment Grade 3,573 106 1,150 7
BB 5
B 1
Lower than B
Total Sub-Investment Grade 6
Total No Rating 99 4
Total $3,573 $106 $1,255 $ 11
(a) Excludes $3 million and $7 million of available for sale and held to maturity agency asset-backed securities, respectively.

The PNC Financial Services Group, Inc. Form 10-K 43

Residential Mortgage-Backed Securities
At December 31, 2011, our residential mortgage-backed
securities portfolio was comprised of $31.7 billion fair value
of US government agency-backed securities and $5.6 billion
fair value of non-agency (private issuer) securities. The
agency securities are generally collateralized by 1-4 family,
conforming, fixed-rate residential mortgages. The non-agency
securities are also generally collateralized by 1-4 family
residential mortgages. The mortgage loans underlying the
non-agency securities are generally non-conforming (i.e.,
original balances in excess of the amount qualifying for
agency securities) and predominately have interest rates that
are fixed for a period of time, after which the rate adjusts to a
floating rate based upon a contractual spread that is indexed to
a market rate (i.e., a hybrid ARM), or interest rates that are
fixed for the term of the loan.
Substantially all of the non-agency securities are senior
tranches in the securitization structure and at origination had
credit protection in the form of credit enhancement, over-
collateralization and/or excess spread accounts.
During 2011, we recorded OTTI credit losses of $130 million
on non-agency residential mortgage-backed securities. Almost
all of the losses were associated with securities rated below
investment grade. As of December 31, 2011, the noncredit
portion of OTTI losses recorded in accumulated other
comprehensive loss for non-agency residential mortgage-
backed securities totaled $987 million and the related
securities had a fair value of $3.4 billion.
The fair value of sub-investment grade investment securities
for which we have not recorded an OTTI credit loss as of
December 31, 2011 totaled $1.5 billion, with unrealized net
losses of $93 million. The results of our security-level
assessments indicate that we will recover the entire cost basis
of these securities. Note 7 Investment Securities in the Notes
To Consolidated Financial Statements in Item 8 of this Report
provides further detail regarding our process for assessing
OTTI for these securities.
Commercial Mortgage-Backed Securities
The fair value of the non-agency commercial mortgage-
backed securities portfolio was $6.3 billion at December 31,
2011 and consisted of fixed-rate, private-issuer securities
collateralized by non-residential properties, primarily retail
properties, office buildings, and multi-family housing. The
agency commercial mortgage-backed securities portfolio was
$2.5 billion fair value at December 31, 2011 consisting of
multi-family housing. Substantially all of the securities are the
most senior tranches in the subordination structure.
44 The PNC Financial Services Group, Inc. Form 10-K
There were no OTTI credit losses on commercial mortgage-
backed securities during 2011.
Asset-Backed Securities
The fair value of the asset-backed securities portfolio was $4.9
billion at December 31, 2011 and consisted of fixed-rate and
floating-rate, private-issuer securities collateralized primarily
by various consumer credit products, including residential
mortgage loans, credit cards, automobile loans, and student
loans. Substantially all of the securities are senior tranches in
the securitization structure and have credit protection in the
form of credit enhancement, over-collateralization and/or
excess spread accounts.
We recorded OTTI credit losses of $21 million on asset-
backed securities during 2011. All of the securities are
collateralized by first and second lien residential mortgage
loans and are rated below investment grade. As of
December 31, 2011, the noncredit portion of OTTI losses
recorded in accumulated other comprehensive loss for asset-
backed securities totaled $185 million and the related
securities had a fair value of $573 million.
For the sub-investment grade investment securities (available
for sale and held to maturity) for which we have not recorded
an OTTI loss through December 31, 2011, the remaining fair
value was $133 million, with unrealized net gains of $13
million. The results of our security-level assessments indicate
that we will recover the cost basis of these securities. Note 7
Investment Securities in the Notes To Consolidated Financial
Statements in Item 8 of this Report provides further detail
regarding our process for assessing OTTI for these securities.
If current housing and economic conditions were to worsen,
and if market volatility and illiquidity were to worsen, or if
market interest rates were to increase appreciably, the
valuation of our investment securities portfolio could continue
to be adversely affected and we could incur additional OTTI
credit losses that would impact our Consolidated Income
Statement.
LOANS HELD FOR SALE FUNDING AND CAPITAL SOURCES
Dec. 31 Dec. 31 Details Of Funding Sources
In millions 2011 2010
Dec. 31 Dec. 31
Commercial mortgages at fair value $ 843 $ 877 In millions 2011 2010
Commercial mortgages at lower of cost or Deposits
market 451 330
Money market $ 89,912 $ 84,581
Total commercial mortgages 1,294 1,207
Demand 57,717 50,069
Residential mortgages at fair value 1,522 1,878
Retail certificates of deposit 29,518 37,337
Residential mortgages at lower of cost or market 12
Savings 8,705 7,340
Total residential mortgages 1,522 1,890
Other time 327 549
Other 120 395
Time deposits in foreign offices 1,787 3,514
Total $2,936 $3,492
Total deposits 187,966 183,390
Borrowed funds
We stopped originating certain commercial mortgage loans
designated as held for sale in 2008 and continue pursuing Federal funds purchased and repurchase
agreements 2,984 4,144
opportunities to reduce these positions at appropriate prices.
We sold $25 million of these commercial mortgage loans held Federal Home Loan Bank borrowings 6,967 6,043
for sale carried at fair value in 2011 and sold $241 million in Bank notes and senior debt 11,793 12,904
2010. Subordinated debt 8,321 9,842
Other 6,639 6,555
We recognized total net gains of $48 million in 2011 on the
Total borrowed funds 36,704 39,488
valuation and sale of commercial mortgage loans held for sale,
Total $224,670 $222,878
net of hedges. Net losses of $18 million on the valuation and
sale of commercial mortgage loans held for sale, net of
hedges, were recognized in 2010. Total funding sources increased $1.8 billion at December 31,
2011 compared with December 31, 2010.
Residential mortgage loan origination volume was $11.4
billion in 2011. Substantially all such loans were originated Total deposits increased $4.6 billion, or 2%, at December 31,
under agency or Federal Housing Administration (FHA) 2011 compared with December 31, 2010 due to an increase in
standards. We sold $11.9 billion of loans and recognized money market and demand deposits, partially offset by net
related gains of $282 million during 2011. The comparable redemptions of retail certificates of deposit. Interest-bearing
amounts for 2010 were $10.0 billion and $231 million, deposits represented 69% of total deposits at December 31,
respectively. 2011 compared to 73% at December 31, 2010. Total borrowed
funds decreased $2.8 billion since December 31, 2010. The
Interest income on loans held for sale was $193 million in decline from December 31, 2010 was primarily due to
2011. Comparable amounts for 2010 were $263 million. These maturities of federal funds purchased and repurchase
amounts are included in Other interest income on our agreements, bank notes and senior debt, and subordinated debt
Consolidated Income Statement. partially offset by issuances of FHLB borrowings.

GOODWILL AND OTHER INTANGIBLE ASSETS Capital

Goodwill and other intangible assets totaled $10.1 billion at
December 31, 2011 and $10.8 billion at December 31, 2010.
Goodwill increased $.1 billion, to $8.3 billion, at
December 31, 2011 compared with the December 31, 2010
balance due to the BankAtlantic and Flagstar branch
acquisitions and the correction of amounts for an acquisition
affecting prior periods. The $.7 billion decline in other
intangible assets from December 31, 2010 included $.2 billion
and $.4 billion declines in commercial and residential
mortgage servicing rights, respectively. Note 9 Goodwill and
Other Intangible Assets included in the Notes To Consolidated
Financial Statements in Item 8 of this Report provides further
information on these items.
See Capital and Liquidity Actions in the Executive Summary
section of this Item 7 for additional information regarding our
December 2011 announcement that the Federal Reserve
approved the acquisition of RBC Bank (USA) and that the
OCC approved the merger of RBC Bank (USA) with and into
PNC Bank, N.A. with this transaction scheduled to close in
March 2012, our November 2011 redemption of trust
preferred securities, our September 2011 issuance of senior
notes, our July 2011 issuance of preferred stock, and our April
2011 increase to PNCs quarterly common stock dividend.

The PNC Financial Services Group, Inc. Form 10-K 45

We manage our capital position by making adjustments to our Risk-Based Capital
balance sheet size and composition, issuing debt, equity or
Dec. 31 Dec. 31
hybrid instruments, executing treasury stock transactions, Dollars in millions 2011 2010
managing dividend policies and retaining earnings.
Capital components

Total shareholders equity increased $3.8 billion, to $34.1 Shareholders equity

billion, at December 31, 2011 compared with December 31, Common $ 32,417 $ 29,596
2010 as retained earnings increased $2.4 billion. The issuance Preferred 1,636 646
of $1.0 billion of preferred stock in July 2011 contributed to Trust preferred capital securities 2,354 2,907
the increase in capital surplus preferred stock from $.6 Noncontrolling interests 1,351 1,351
billion at December 31, 2010 to $1.6 billion at December 31,
Goodwill and other intangible assets (9,027) (9,053)
2011. Accumulated other comprehensive loss decreased to a
loss of $.1 billion, at December 31, 2011 compared with a loss Eligible deferred income taxes on
goodwill and other intangible
of $.4 billion at December 31, 2010 due to net unrealized
assets 431 461
gains on securities and cash flow hedge derivatives, offset by
an increase in accumulated other comprehensive losses related Pension, other postretirement benefit
plan adjustments 755 380
to the change in the funded status of our pension and other
postretirement benefit plans. Common shares outstanding Net unrealized securities losses,
were 527 million at December 31, 2011 and 526 million at after-tax 41 550
December 31, 2010. Net unrealized gains on cash flow
hedge derivatives, after-tax (717) (522)
Our current common stock repurchase program permits us to Other (168) (224)
purchase up to 25 million shares of PNC common stock on the Tier 1 risk-based capital 29,073 26,092
open market or in privately negotiated transactions. This Subordinated debt 4,571 4,899
program will remain in effect until fully utilized or until Eligible allowance for credit losses 2,904 2,733
modified, superseded or terminated. The extent and timing of Total risk-based capital $ 36,548 $ 33,724
share repurchases under this program will depend on a number
Tier 1 common capital
of factors including, among others, market and general
economic conditions, economic and regulatory capital Tier 1 risk-based capital $ 29,073 $ 26,092
considerations, alternative uses of capital, the potential impact Preferred equity (1,636) (646)
on our credit ratings, and regulatory and contractual Trust preferred capital securities (2,354) (2,907)
limitations. We did not purchase any shares in 2011 under this Noncontrolling interests (1,351) (1,351)
program. See Supervision and Regulation in Item 1 of this Tier 1 common capital $ 23,732 $ 21,188
Report for further information concerning restrictions on
Assets
dividends and stock repurchases, including the impact of the
Federal Reserves current supervisory assessment of capital Risk-weighted assets, including off-
adequacy program which is also discussed in the Capital and balance sheet instruments and market
risk equivalent assets $230,705 $216,283
Liquidity portion of the Executive Summary section of this
Item 7. Adjusted average total assets 261,958 254,693
Capital ratios
Tier 1 common 10.3% 9.8%
Tier 1 risk-based 12.6 12.1
Total risk-based 15.8 15.6
Leverage 11.1 10.2

46 The PNC Financial Services Group, Inc. Form 10-K

Federal banking regulators have stated that they expect all
bank holding companies to have a level and composition of
Tier 1 capital well in excess of the 4% regulatory minimum,
and they have required the largest US bank holding
companies, including PNC, to have a capital buffer sufficient
to withstand losses and allow them to meet credit needs of
their customers through estimated stress scenarios. They have
also stated their view that common equity should be the
dominant form of Tier 1 capital. As a result, regulators are
now emphasizing the Tier 1 common capital ratio in their
evaluation of bank holding company capital levels, although a
formal ratio for this metric is not provided for in current
regulations. We seek to manage our capital consistent with
these regulatory principles, and believe that our December 31,
2011 capital levels were aligned with them.
Dodd-Frank requires the Federal Reserve Board to establish
capital requirements that would, among other things, eliminate
the Tier 1 treatment of trust preferred securities following a
phase-in period expected to begin in 2013. Accordingly, PNC
will evaluate its alternatives, including the potential for
redemption on the first call date of some or all of its trust
preferred securities, based on such considerations it may
consider relevant, including dividend rates, the specifics of the
future capital requirements, capital market conditions,
replacement capital covenants with respect to certain trust
preferred securities, and other factors. See Capital and
Liquidity Actions in the Executive Summary section of this
Item 7 for additional information regarding our November
2011 redemption of trust preferred securities and Note 13
Capital Securities of Subsidiary Trusts and Perpetual Trust
Securities in the Notes To Consolidated Financial Statements
in Item 8 of this Report for additional information on trust
preferred securities.
additional information regarding the Series O Preferred Stock
issuance.
At December 31, 2011, PNC Bank, N.A., our domestic bank
subsidiary, was considered well capitalized based on US
regulatory capital ratio requirements under Basel I. To qualify
as well-capitalized, regulators currently require banks to
maintain capital ratios of at least 6% for Tier 1 risk-based,
10% for total risk-based, and 5% for leverage. See the
Supervision and Regulation section of Item 1 and Note 21
Regulatory Matters in the Notes To Consolidated Financial
Statements in Item 8 of this Report for additional information.
We believe PNC Bank, N.A., will continue to meet these
requirements during 2012.
The access to, and cost of, funding for new business initiatives
including acquisitions, the ability to engage in expanded
business activities, the ability to pay dividends, the level of
deposit insurance costs, and the level and nature of regulatory
oversight depend, in part, on a financial institutions capital
strength.
We provide additional information regarding enhanced capital
requirements and some of their potential impacts on PNC in
Item 1A Risk Factors of this Report.

Our Tier 1 common capital ratio was 10.3% at December 31,

2011, an increase of 50 basis points compared with 9.8% at
December 31, 2010. Our Tier 1 risk-based capital ratio
increased 50 basis points to 12.6% at December 31, 2011 from
12.1% at December 31, 2010. The Tier 1 common capital ratio
increased when compared with December 31, 2010 due to the
retention of earnings partially offset by higher risk-weighted
assets primarily from loan growth. The increase in the Tier 1
risk-based capital ratio compared with December 31, 2010
resulted from the issuance of preferred stock in July 2011 and
retention of earnings somewhat offset by the redemption of
trust preferred securities in November 2011 and higher risk-
weighted assets. See Note 18 Equity in the Notes To
Consolidated Financial Statements in Item 8 of this Report for

The PNC Financial Services Group, Inc. Form 10-K 47

OFF-BALANCE SHEET ARRANGEMENTS
AND VARIABLE INTEREST ENTITIES
We engage in a variety of activities that involve
unconsolidated entities or that are otherwise not reflected in
our Consolidated Balance Sheet that are generally referred to
as off-balance sheet arrangements. Additional information
on these types of activities is included in the following
sections of this Report:
Commitments, including contractual obligations and
other commitments, included within the Risk
Management section of this Item 7,
Note 3 Loan Sale and Servicing Activities and
Variable Interest Entities in the Notes To
Consolidated Financial Statements included in Item 8
of this Report,
Note 13 Capital Securities of Subsidiary Trusts and
Perpetual Trust Securities in the Notes To
Consolidated Financial Statements included in Item 8
of this Report, and
Note 23 Commitments and Guarantees in the Notes
To Consolidated Financial Statements included in
Item 8 of this Report.
PNC consolidates variable interest entities (VIEs) when we
are deemed to be the primary beneficiary. The primary
beneficiary of a VIE is determined to be the party that meets
both of the following criteria: (1) has the power to make
decisions that most significantly affect the economic
performance of the VIE and (2) has the obligation to absorb
losses or the right to receive benefits that in either case could
potentially be significant to the VIE.
A summary of VIEs, including those that we have
consolidated and those in which we hold variable interests but
have not consolidated into our financial statements, as of
December 31, 2011 and December 31, 2010 is included in
Note 3 in the Notes To Consolidated Financial Statements
included in Item 8 of this Report.
48 The PNC Financial Services Group, Inc. Form 10-K
Trust Preferred Securities
In connection with the $950 million in principal amount of
junior subordinated debentures associated with the trust
preferred securities issued by PNC Capital Trusts C, D and E,
as well as in connection with the obligations that remain
outstanding assumed by PNC with respect to $1.7 billion in
principal amount of junior subordinated debentures issued by
acquired entities in association with trust preferred securities
issued by various subsidiary statutory trusts, we are subject to
certain restrictions, including restrictions on dividend
payments. Generally, if there is (i) an event of default under
the debentures, (ii) PNC elects to defer interest on the
debentures, (iii) PNC exercises its right to defer payments on
the related trust preferred securities issued by the statutory
trusts, or (iv) there is a default under PNCs guarantee of such
payment obligations, as specified in the applicable governing
documents, then PNC would be subject during the period of
such default or deferral to restrictions on dividends and other
provisions protecting the status of the debenture holders
similar to or in some ways more restrictive than those
potentially imposed under the Exchange Agreements with
Trust II and Trust III, as described in Note 13 Capital
Securities of Subsidiary Trusts and Perpetual Trust Securities
in the Notes To Consolidated Financial Statements in Item 8
of this Report.
Also, in connection with the Trust E Securities sale, we are
subject to a replacement capital covenant, which is described
in Note 13 Capital Securities of Subsidiary Trusts and
Perpetual Trust Securities in the Notes To Consolidated
Financial Statements in Item 8 of this Report.
FAIR VALUE MEASUREMENTS
In addition to the following, see Note 8 Fair Value in the Notes To Consolidated Financial Statements in Item 8 of this Report for
further information regarding fair value.

Assets recorded at fair value represented 25% of total assets at December 31, 2011 and 27% at December 31, 2010. Liabilities
recorded at fair value represented 4% of total liabilities at December 31, 2011 and 3% at December 31, 2010, respectively.

The following table includes the assets and liabilities measured at fair value and the portion of such assets and liabilities that are
classified within Level 3 of the valuation hierarchy.

December 31, 2011 December 31, 2010

Total Fair Total Fair
In millions Value Level 3 Value Level 3
Assets
Securities available for sale $48,568 $ 6,729 $57,310 $ 8,583
Financial derivatives 9,463 67 5,757 77
Residential mortgage loans held for sale 1,522 1,878
Trading securities 2,513 39 1,826 69
Residential mortgage servicing rights 647 647 1,033 1,033
Commercial mortgage loans held for sale 843 843 877 877
Equity investments 1,504 1,504 1,384 1,384
Customer resale agreements 732 866
Loans 227 5 116 2
Other assets 639 217 853 403
Total assets $66,658 $10,051 $71,900 $12,428
Level 3 assets as a percentage of total assets at fair value 15% 17%
Level 3 assets as a percentage of consolidated assets 4% 5%
Liabilities
Financial derivatives $ 7,606 $ 308 $ 4,935 $ 460
Trading securities sold short 1,016 2,530
Other liabilities 3 6
Total liabilities $ 8,625 $ 308 $ 7,471 $ 460
Level 3 liabilities as a percentage of total liabilities at fair value 4% 6%
Level 3 liabilities as a percentage of consolidated liabilities <1% <1%

The majority of Level 3 assets represent non-agency residential mortgage-backed and asset-backed securities in the available for
sale securities portfolio for which there was a lack of observable market activity.

During 2011, no material transfers of assets or liabilities between the hierarchy levels occurred.

The PNC Financial Services Group, Inc. Form 10-K 49

BUSINESS SEGMENTS REVIEW
We have six reportable business segments:
Retail Banking
Corporate & Institutional Banking
Asset Management Group
Residential Mortgage Banking
BlackRock
Non-Strategic Assets Portfolio
Once we entered into an agreement to sell GIS, it was no
longer a reportable business segment. We sold GIS on July 1,
2010.
Business segment results, including inter-segment revenues,
and a description of each business are included in Note 25
Segment Reporting included in the Notes To Consolidated
Financial Statements in Item 8 of this Report. Certain amounts
included in this Item 7 differ from those amounts shown in
Note 25 primarily due to the presentation in this Item 7 of
business net interest revenue on a taxable-equivalent basis.
Results of individual businesses are presented based on our
management accounting practices and management structure.
There is no comprehensive, authoritative body of guidance for
management accounting equivalent to GAAP; therefore, the
financial results of our individual businesses are not
necessarily comparable with similar information for any other
company. We refine our methodologies from time to time as
our management accounting practices are enhanced and our
businesses and management structure change. Certain prior
period amounts have been reclassified to reflect current
methodologies and our current business and management
structure. Financial results are presented, to the extent
practicable, as if each business operated on a stand-alone
basis. Additionally, we have aggregated the results for
corporate support functions within Other for financial
reporting purposes.
Assets receive a funding charge and liabilities and capital
receive a funding credit based on a transfer pricing
methodology that incorporates product maturities, duration
and other factors.
50 The PNC Financial Services Group, Inc. Form 10-K
A portion of capital is intended to cover unexpected losses and
is assigned to our business segments using our risk-based
economic capital model, including consideration of the
goodwill and other intangible assets at those business
segments, as well as the diversification of risk among the
business segments. We have revised certain capital allocations
among our business segments, including amounts for prior
periods. PNCs total capital did not change as a result of these
adjustments for any periods presented. However, capital
allocations to the segments were lower in the year-over-year
comparisons primarily due to improving credit quality.
We have allocated the allowances for loan and lease losses
and for unfunded loan commitments and letters of credit based
on our assessment of risk in the business segment loan
portfolios. Our allocation of the costs incurred by operations
and other shared support areas not directly aligned with the
businesses is primarily based on the use of services.
Total business segment financial results differ from total
consolidated results from continuing operations before
noncontrolling interests, which itself excludes the earnings
and revenue attributable to GIS through June 30, 2010 and the
related third quarter 2010 after-tax gain on the sale of GIS that
are reflected in discontinued operations. The impact of these
differences is reflected in the Other category. Other for
purposes of this Business Segments Review and the Business
Segment Highlights in the Executive Summary includes
residual activities that do not meet the criteria for disclosure as
a separate reportable business, such as gains or losses related
to BlackRock transactions, integration costs, asset and liability
management activities including net securities gains or losses,
other-than-temporary impairment of investment securities and
certain trading activities, exited businesses, alternative
investments, including private equity, intercompany
eliminations, most corporate overhead, tax adjustments that
are not allocated to business segments, and differences
between business segment performance reporting and
financial statement reporting (GAAP), including the
presentation of net income attributable to noncontrolling
interests, as the segments results exclude their portion of net
income attributable to noncontrolling interests.
Results Of Businesses Summary
(Unaudited)

Income (Loss) Revenue Average Assets (a)

Year ended December 31 - in millions 2011 2010 2011 2010 2011 2010

Retail Banking $ 31 $ 144 $ 5,042 $ 5,386 $ 66,448 $ 67,428

Corporate & Institutional Banking 1,875 1,794 4,669 4,950 81,043 77,540
Asset Management Group 141 137 887 884 6,719 6,954
Residential Mortgage Banking 87 269 948 992 11,270 9,247
BlackRock 361 351 464 462 5,516 5,428
Non-Strategic Assets Portfolio 200 (57) 960 1,136 13,119 17,517
Total business segments 2,695 2,638 12,970 13,810 184,115 184,114
Other (b) (c) 376 386 1,356 1,366 81,220 80,788
Income from continuing operations before noncontrolling interests (d) (e) $3,071 $3,024 $14,326 $15,176 $265,335 $264,902
(a) Period-end balances for BlackRock.
(b) For our segment reporting presentation in this Item 7, Other earnings for 2011 included a $129 million after-tax noncash charge ($198 million pretax) for the unamortized discount
related to redemption of $750 million of trust preferred securities during the fourth quarter of 2011 and $27 million of after-tax ($42 million pretax) integration costs. Other earnings
and revenue for 2010 included a $102 million after-tax ($160 million pretax) gain related to our gain on the sale of a portion of our investment in BlackRock stock as part of a
BlackRock secondary common stock offering in November 2010. Other earnings for 2010 included $251 million of after-tax ($387 million pretax) integration costs primarily
related to acquisitions.
(c) Other average assets include securities available for sale associated with asset and liability management activities.
(d) Amounts are presented on a continuing operations basis and therefore exclude the earnings, revenue, and assets of GIS for the first six months of 2010 and the related third quarter
2010 gain on the sale of GIS.
(e) Amounts for income for 2011 and 2010 include after-tax expenses of $210 million and $46 million ($324 million and $71 million pretax, respectively) for residential mortgage
foreclosure-related expenses, primarily as a result of ongoing governmental matters. These amounts have been allocated among the following: Residential Mortgage Banking,
Non-Strategic Assets Portfolio, and Other.

The PNC Financial Services Group, Inc. Form 10-K 51

 Year ended December 31
RETAIL BANKING Dollars in millions, except as noted 2011 2010
(Unaudited) OTHER INFORMATION (CONTINUED) (a)
Year ended December 31 Purchased impaired loans (c) $ 757 $ 895
Dollars in millions, except as noted 2011 2010
Commercial lending net charge-offs $ 219 $ 330
INCOME STATEMENT
Credit card lending net charge-offs 211 316
Net interest income $ 3,280 $ 3,435
Consumer lending (excluding credit card) net
Noninterest income charge-offs 427 424
Service charges on deposits 510 681 Total net charge-offs $ 857 $1,070
Brokerage 201 213 Commercial lending net charge-off ratio 1.82% 2.64%
Consumer services 927 912 Credit card lending net charge-off ratio 5.64% 8.02%
Other 124 145 Consumer lending (excluding credit card) net
Total noninterest income 1,762 1,951 charge-off ratio 1.00% 1.00%
Total revenue 5,042 5,386 Total net charge-off ratio 1.47% 1.82%
Provision for credit losses 891 1,103 Home equity portfolio credit statistics: (d)
Noninterest expense 4,103 4,056 % of first lien positions at origination (e) 39% 36%
Pretax earnings 48 227 Weighted-average original loan-to-value ratios
Income taxes 17 83 (LTVs) (e) 72% 73%
Earnings $ 31 $ 144 Weighted-average updated FICO scores (f) 743 726
AVERAGE BALANCE SHEET Net charge-off ratio 1.09% .90%
Loans Loans 30 59 days past due .58% .49%
Consumer Loans 60 89 days past due .38% .30%
Home equity $ 25,874 $ 26,450 Loans 90 days past due 1.22% 1.02%
Indirect auto 3,089 2,098 Other statistics:
Indirect other 1,478 1,875 ATMs 6,806 6,673
Education 9,103 8,497 Branches (g) 2,511 2,470
Credit cards 3,738 3,938 Customer-related statistics: (in thousands)
Other 1,866 1,804 Retail Banking checking relationships 5,761 5,465
Total consumer 45,148 44,662 Retail online banking active customers 3,519 3,057
Commercial and commercial real Retail online bill payment active customers 1,105 977
estate 10,567 11,177 Brokerage statistics:
Floor plan 1,450 1,336 Financial consultants (h) 686 694
Residential mortgage 1,180 1,599 Full service brokerage offices 38 34
Total loans 58,345 58,774 Brokerage account assets (billions) $ 34 $ 34
Goodwill and other intangible assets 5,751 5,861 (a) Presented as of December 31, except for net charge-offs and annualized net charge-
off ratios, which are for the year ended.
Other assets 2,352 2,793 (b) Includes nonperforming loans of $810 million at December 31, 2011 and $694
Total assets $ 66,448 $ 67,428 million at December 31, 2010.
(c) Recorded investment of purchased impaired loans related to acquisitions.
Deposits (d) Lien position, LTV, FICO and delinquency statistics are based upon balances and
Noninterest-bearing demand $ 18,183 $ 17,223 other data that exclude the impact of accounting for acquired loans.
(e) Lien positions and LTV are based upon data from loan origination. Original LTV
Interest-bearing demand 22,196 19,776 excludes certain acquired portfolio loans where this data is not available.
Money market 41,002 40,125 (f) Represents FICO scores that are updated monthly for home equity lines and
quarterly for the home equity installment loans.
Total transaction deposits 81,381 77,124 (g) Excludes satellite offices (e.g., drive-ups, electronic branches, retirement centers)
Savings 8,098 6,938 that provide limited products and/or services.
(h) Financial consultants provide services in full service brokerage offices and
Certificates of deposit 33,006 41,539 traditional bank branches.
Total deposits 122,485 125,601
Other liabilities 855 1,458 Retail Banking earned $31 million for 2011 compared with
Capital 8,168 8,439
earnings of $144 million in 2010. Earnings declined from the
Total liabilities and equity $131,508 $135,498
prior year as lower revenues from the impact of Regulation E
PERFORMANCE RATIOS
rules related to overdraft fees, a low interest rate environment,
Return on average capital % 2%
and the regulatory impact of lower interchange fees on debit
Return on average assets .05 .21
card transactions were partially offset by a lower provision for
Noninterest income to total revenue 35 36
credit losses and higher volumes of customer-initiated
Efficiency 81 75
transactions. Retail Banking continued to maintain its focus on
OTHER INFORMATION (a)
growing core customers, selectively investing in the business
Credit-related statistics:
for future growth, and disciplined expense management.
Commercial nonperforming assets $ 336 $ 297
Consumer nonperforming assets 513 422
Total nonperforming assets (b) $ 849 $ 719

52 The PNC Financial Services Group, Inc. Form 10-K

Retail Bankings core strategy is to grow checking deposits as
a low-cost funding source and as the cornerstone product to
build valuable customer relationships. The goal is to acquire
and retain customers who maintain their primary checking and
transaction relationships with PNC. The business is focused
on deepening its share of customers financial assets,
including savings and liquid deposits, investable assets and
loans through sales strategies, differentiated product offerings
and customer satisfaction. In this challenging economic
environment, Retail Banking is also focused on expanding the
use of alternative, lower cost distribution channels while
continuing to optimize its traditional branch network. The
business has an expansive and growing branch footprint
covering nearly one-third of the U.S. population in 14 states
and Washington, D.C. with a network of 2,511 branches and
6,806 ATMs at December 31, 2011.
Successful execution of the Retail Banking strategy in 2011 is
reflected in the following:
Net new checking relationships grew 296,000 in
2011, including 41,000 from the BankAtlantic and
Flagstar branch acquisitions. The growth reflects
strong results and gains in all of our markets. We are
seeing strong customer retention in the overall
network.
Continued success in implementing Retail Bankings
deposit strategy resulted in growth in average
transaction deposits and a reduction in higher rate
certificates of deposit. In 2011 average transaction
deposits grew $4.3 billion, or 6%, over 2010 and
average certificates of deposit declined $8.5 billion,
or 21% in accordance with our business plan.
In December 2011, Retail Banking added
approximately $210 million in deposits, 9,000
checking relationships, 27 branches and 29 ATMs
through the branch acquisition from Flagstar Bank,
FSB, in the northern metropolitan Atlanta, Georgia
area.
In June 2011, Retail Banking added approximately
$280 million in deposits, 32,000 checking
relationships, 19 branches and 27 ATMs through the
branch acquisition from BankAtlantic in the greater
Tampa, Florida area.
The planned acquisition of RBC Bank (USA) is
expected to expand PNCs footprint to 17 states and
Washington, D.C. and nearly 2,900 branches. The
transaction is currently expected to close in March
2012 subject to remaining customary closing
conditions. PNC and RBC Bank (USA) have both
received regulatory approvals in relation to the
respective applications filed with the regulators.
Our investment in online banking capabilities
continues to pay off as active online banking
customers and active online bill payment customers
grew by 15% and 13%, respectively, in 2011.
Retail Banking launched new checking account and
credit card products during the first quarter of 2011.
These new products are designed to provide more
choices for customers and grow value of clients for
PNC.
Our award-winning Virtual Wallet product is
providing strong momentum for customer growth.
Total revenue for 2011 was $5.0 billion compared with $5.4
billion for 2010. Net interest income of $3.3 billion declined
$155 million compared with 2010. The decrease over the prior
period resulted from lower interest credits assigned to
deposits, reflective of the rate environment, and lower average
loan balances somewhat offset by higher demand deposit
balances and a decrease in higher rate certificates of deposit
balances.
Noninterest income for 2011 declined $189 million compared
to 2010. The decline was driven by lower overdraft fees
resulting from the impact of Regulation E rules and lower
interchange rates on debit card transactions, partially offset by
higher volumes of customer-initiated transactions including
debit and credit cards.
For 2011, Retail Banking revenue was negatively impacted by
approximately $275 million compared with 2010 due to the
impact of the rules set forth in Regulation E related to
overdraft fees and the Dodd-Frank limits related to
interchange rates on debit card transactions.
Regulation E, which became effective in the third
quarter of 2010, had an incremental negative impact
to 2011 revenues of approximately $200 million
compared with 2010.
The Dodd-Frank limits related to interchange fees
were effective October 1, 2011 and had a negative
impact on revenues of approximately $75 million in
the fourth quarter of 2011 and are expected to have
an additional incremental reduction in 2012 annual
revenue of approximately $175 million, based on
2011 transaction volumes.
The provision for credit losses was $.9 billion in 2011
compared with $1.1 billion in 2010. Net charge-offs were $.9
billion for 2011 compared with $1.1 billion in the prior year.
Improvements in credit quality are evident in the small
business and credit card portfolios. We have continued to see
increases in home equity delinquencies and as a result, we
have worked with borrowers as employment and home values
have been slow to recover in this economy. The level of
provisioning will be dependent on general economic
conditions, loan growth, utilization of credit commitments and
asset quality.
Noninterest expense in 2011 increased $47 million from 2010.
The increase was primarily attributable to selective investment
in key areas of the business largely offset by lower FDIC
expenses.
Growing core checking deposits is key to the Retail Banking
strategy, and is critical to growing our overall payments
business. The deposit product strategy of Retail Banking is to
remain disciplined on pricing, target specific products and
The PNC Financial Services Group, Inc. Form 10-K 53
markets for growth, and focus on the retention and growth of
balances for relationship customers.
In 2011, average total deposits of $122.5 billion decreased
$3.1 billion, or 2%, compared with 2010.
Average demand deposits increased $3.4 billion, or
9%, over 2010. The increase was primarily driven by
customer growth and customer preferences for
liquidity.
Average money market deposits increased $877
million, or 2%, from 2010. The increase was
primarily due to core money market growth as
customers generally preferred more liquid deposits in
a low rate environment.
Average savings deposits increased $1.2 billion, or
17%, over 2010. The increase was attributable to net
customer growth and new product offerings.
Average consumer certificates of deposit decreased
$8.5 billion or 21% from 2010. The decline is
expected to continue through 2012 due to the
continued run-off of higher rate certificates of
deposit.
Currently, our primary focus is on a relationship-based
lending strategy that targets specific customer sectors
including mass and mass affluent consumers, small businesses
and auto dealerships. In 2011, average total loans were $58.3
billion, a decrease of $429 million, or 1%, over 2010.
Average indirect auto loans increased $991 million,
or 47%, over 2010. The increase was due to the
expansion of our indirect sales force and product
introduction to acquired markets, as well as overall
increases in auto sales.
54 The PNC Financial Services Group, Inc. Form 10-K
Average education loans grew $606 million, or 7%,
compared with 2010, primarily due to portfolio
purchases in December 2010, July 2011, and
November 2011 of approximately $450 million, $445
million, and $560 million, respectively.
Average auto dealer floor plan loans grew $114
million, or 9%, compared with 2010, primarily
resulting from additional dealer relationships and
higher line utilization.
Average credit card balances decreased $200 million,
or 5%, over 2010. The decrease was primarily the
result of fewer active accounts generating balances
coupled with increased paydowns on existing
accounts.
Average commercial and commercial real estate
loans declined $610 million, or 5%, compared with
2010. The decline was primarily due to refinancings,
paydowns, and charge-offs outpacing loan demand.
Average home equity loans declined $576 million, or
2%, compared with 2010. Home equity loan demand
remained soft in the current economic climate. The
decline is driven by loan demand being outpaced by
paydowns, refinancings, and charge-offs. Retail
Bankings home equity loan portfolio is relationship
based, with 96% of the portfolio attributable to
borrowers in our primary geographic footprint. The
nonperforming assets and charge-offs that we have
experienced are within our expectations given current
market conditions.
Average indirect other and residential mortgages are
primarily run-off portfolios and declined $397
million and $419 million, respectively, compared
with 2010. The indirect other portfolio is comprised
of marine, RV, and other indirect loan products.
 Year ended December 31
CORPORATE & INSTITUTIONAL BANKING Dollars in millions, except as noted 2011 2010
(Unaudited) PERFORMANCE RATIOS
Year ended December 31 Return on average capital 23% 21%
Dollars in millions, except as noted 2011 2010
Return on average assets 2.31 2.31
INCOME STATEMENT Noninterest income to total revenue 27 28
Net interest income $ 3,417 $ 3,587 Efficiency 39 37
Noninterest income COMMERCIAL MORTGAGE SERVICING
Corporate service fees 767 961 PORTFOLIO (in billions)
Other 485 402 Beginning of period $ 266 $ 287
Noninterest income 1,252 1,363 Acquisitions/additions 43 35
Total revenue 4,669 4,950 Repayments/transfers (42) (56)
Provision for credit losses (benefit) (124) 303 End of period $ 267 $ 266
Noninterest expense 1,830 1,821 OTHER INFORMATION
Pretax earnings 2,963 2,826 Consolidated revenue from: (a)
Income taxes 1,088 1,032 Treasury Management $ 1,187 $ 1,220
Earnings $ 1,875 $ 1,794 Capital Markets $ 622 $ 606
AVERAGE BALANCE SHEET Commercial mortgage loans held for
Loans sale (b) $ 113 $ 58
Commercial $35,764 $32,787 Commercial mortgage loan servicing
income, net of amortization (c) 156 244
Commercial real estate 13,938 16,466
Commercial mortgage servicing rights
Commercial real estate related 3,782 3,076 (impairment)/recovery (157) (40)
Asset-based lending 8,171 6,318 Total commercial mortgage banking
Equipment lease financing 5,506 5,487 activities $ 112 $ 262
Total loans 67,161 64,134 Total loans (d) $73,417 $63,695
Goodwill and other intangible assets 3,405 3,613 Net carrying amount of commercial
Loans held for sale 1,257 1,473 mortgage servicing rights (d) $ 468 $ 665
Other assets 9,220 8,320 Credit-related statistics:
Total assets $81,043 $77,540 Nonperforming assets (d) (e) $ 1,889 $ 2,594
Deposits Purchased impaired loans (d) (f) $ 404 $ 714
Noninterest-bearing demand $31,462 $24,713 Net charge-offs $ 375 $ 1,074
(a) Represents consolidated PNC amounts. See the additional revenue discussion
Money market 12,925 12,153
regarding treasury management, capital markets-related products and services, and
Other 5,651 6,980 commercial mortgage banking activities in the Product Revenue section of the
Consolidated Income Statement Review.
Total deposits 50,038 43,846 (b) Includes valuations on commercial mortgage loans held for sale and related
Other liabilities 13,323 11,949 commitments, derivatives valuations, origination fees, gains on sale of loans held for
sale and net interest income on loans held for sale.
Capital 8,010 8,588 (c) Includes net interest income and noninterest income from loan servicing and
Total liabilities and equity $71,371 $64,383 ancillary services, net of commercial mortgage servicing rights amortization.
Commercial mortgage servicing rights (impairment)/recovery is shown separately.
Higher amortization and impairment charges in 2011 were due primarily to
decreased interest rates and related prepayments by borrowers.
(d) As of December 31.
(e) Includes nonperforming loans of $1.7 billion at December 31, 2011 and $2.4 billion
at December 31, 2010.
(f) Recorded investment of purchased impaired loans related to acquisitions.

The PNC Financial Services Group, Inc. Form 10-K 55

Corporate & Institutional Banking earned $1.9 billion in 2011
and $1.8 billion in 2010. The increase in earnings was
primarily due to an improvement in the provision for credit
losses, which was a benefit in 2011, partially offset by a
reduction in the value of commercial mortgage servicing
rights and lower net interest income. We continued to focus on
adding new clients, increasing cross sales, and remaining
committed to strong expense discipline.
Highlights of Corporate & Institutional Bankings
performance during 2011 include the following:
Overall results benefited from successful sales efforts
to new clients and product penetration of the existing
customer base.
New primary client acquisitions in Corporate
Banking of 1,165 exceeded the 1,000 new primary
clients goal for the year and represented a 15%
increase over 2010 new primary clients.
Loan commitments increased 12% to $147 billion at
year end 2011, primarily in our Business Credit,
Healthcare, and Public Finance businesses.
Loan balances have increased steadily each quarter
during 2011, including an increase in average loans
for the fourth quarter of 2011 of $8.8 billion or 14%,
compared to the fourth quarter of 2010.
Our Treasury Management business, which ranks
among the top providers in the country, continued to
invest in markets, products and infrastructure as well
as major initiatives such as healthcare.
Cross sales of treasury management and capital
markets products to customers in PNCs markets
continued to be successful and were ahead of both
targets and 2010.
Midland Loan Services, one of the leading third-party
providers of servicing for the commercial real estate
industry, received the highest U.S. servicer and
special servicer ratings from Fitch Ratings and
Standard & Poors for the 11th consecutive year.
Midland Loan Services was the number one servicer
of FNMA and FHLMC multifamily and healthcare
loans and was the second leading servicer of
commercial and multifamily loans by volume as of
December 31, 2011 according to Mortgage Bankers
Association.
Mergers and Acquisitions Journal named Harris
Williams & Co. Advisor of the Year in its March
2011 issue.
Net interest income in 2011 was $3.4 billion, a 5% decline
from 2010, reflecting lower purchase accounting accretion and
lower interest credits assigned to deposits, partially offset by
impacts from increases in average deposits and loans.
Corporate service fees were $767 million in 2011, a decrease
of $194 million from 2010, primarily due to a reduction in the
value of commercial mortgage servicing rights largely driven
by lower interest rates and higher loan prepayment rates, and
56 The PNC Financial Services Group, Inc. Form 10-K
lower special servicing fees. The major components of
corporate service fees are treasury management, corporate
finance fees and commercial mortgage servicing revenue.
Other noninterest income was $485 million in 2011 compared
with $402 million in 2010. The increase of $83 million was
primarily due to valuations associated with the commercial
mortgage held-for-sale portfolio, higher revenue from multi-
family agency loan production and customer driven capital
markets activity.
The provision for credit losses was a benefit of $124 million
in 2011 compared with a provision of $303 million in 2010.
The improvement reflected continued positive migration in
portfolio credit quality which more than offset the impact of
higher loan and commitment levels. Net charge-offs in 2011
of $375 million decreased $699 million, or 65%, compared
with 2010. The decline was attributable primarily to the
commercial real estate and aviation portfolios. Nonperforming
assets declined for the seventh consecutive quarter, and at $1.9
billion represented a 27% decrease from December 31, 2010.
Noninterest expense was $1.8 billion in both 2011 and 2010.
Higher compensation-related costs were offset by the impact
of the sale of a duplicative agency servicing operation in 2010,
costs associated with aviation assets held for sale in 2010, and
lower legal expenses.
Average loans were $67.2 billion in 2011 compared with
$64.1 billion in 2010, an increase of 5%.
The Corporate Banking business provides lending,
treasury management, and capital markets-related
products and services to mid-sized corporations,
government and not-for-profit entities, and
selectively to large corporations. Average loans for
this business increased $2.4 billion or 8% in 2011
compared with 2010. Loan commitments have
increased since the second quarter of 2010 due to
new customers and increased demand from existing
customers.
PNC Real Estate provides commercial real estate and
real-estate related lending and is one of the industrys
top providers of both conventional and affordable
multifamily financing. Average loans for this
business declined $1.1 billion or 7% in 2011
compared to 2010 due to loan sales, paydowns and
charge-offs, partially offset by improved originations.
PNC Business Credit is one of the top asset-based
lenders in the country. The loan portfolio is relatively
high yielding, with moderate risk, as the loans are
mainly secured by liquid assets. Average loans
increased $1.9 billion or 30% in 2011 compared with
2010 due to customers seeking stable lending
sources, loan usage rates, and market expansion. We
expanded our operations with the acquisition of an
asset-based lending group in the United Kingdom,
completed in November 2010. Total loans acquired
were approximately $300 million.
 PNC Equipment Finance is the 4th largest bank- ASSET MANAGEMENT GROUP
affiliated leasing company with over $9 billion in (Unaudited)
equipment finance assets.
Year ended December 31
Dollars in millions, except as noted 2011 2010
Average deposits were $50.0 billion in 2011, an increase of
INCOME STATEMENT
$6.2 billion, or 14%, compared with 2010.
Net interest income $ 238 $ 256
Deposit growth has been very strong, particularly in
Noninterest income 649 628
the second half of 2011, and is an industry-wide trend
Total revenue 887 884
as clients are holding record levels of cash and
liquidity. Provision for credit losses (benefit) (24) 20
Deposit inflows into noninterest-bearing demand Noninterest expense 687 647
deposits continued as FDIC insurance has been an Pretax earnings 224 217
attraction for customers maintaining liquidity during Income taxes 83 80
this prolonged period of low interest rates. Earnings $ 141 $ 137
The repeal of Regulation Q limitations on interest- AVERAGE BALANCE SHEET
bearing commercial demand deposit accounts Loans
became effective in the third quarter of 2011. As Consumer $4,108 $4,025
expected, interest in this product has been muted due Commercial and commercial real estate 1,301 1,434
to the current rate environment and the limited Residential mortgage 706 850
amount of FDIC insurance coverage. Total loans 6,115 6,309
Goodwill and other intangible assets 361 399
The commercial mortgage servicing portfolio was $267 billion Other assets 243 246
at December 31, 2011 compared with $266 billion Total assets $6,719 $6,954
December 31, 2010. Servicing additions were mostly offset by
Deposits
portfolio run-off.
Noninterest-bearing demand $1,209 $1,324
Interest-bearing demand 2,361 1,835
See the additional revenue discussion regarding treasury
Money market 3,589 3,283
management, capital markets-related products and services,
Total transaction deposits 7,159 6,442
and commercial mortgage banking activities in the Product
Revenue section of the Consolidated Income Statement CDs/IRAs/savings deposits 632 748
Review. Total deposits 7,791 7,190
Other liabilities 74 89
Capital 349 402
Total liabilities and equity $8,214 $7,681
P ERFORMANCE RATIOS
Return on average capital 40% 34%
Return on average assets 2.10 1.97
Noninterest income to total revenue 73 71
Efficiency 77 73
OTHER INFORMATION
Total nonperforming assets (a) (b) $ 60 $ 90
Purchased impaired loans (a) (c) $ 127 $ 146
Total net charge-offs $ $ 42

The PNC Financial Services Group, Inc. Form 10-K 57

Year ended December 31
Dollars in millions, except as noted 2011 2010 Highlights of Asset Management Groups performance during
ASSETS UNDER ADMINISTRATION 2011 include the following:
(in billions) (a) (d) Positive net flows in both discretionary assets under
Personal $100 $ 99 management and total assets under administration;
Institutional 110 113 Strong sales production, up nearly 40% over the prior
Total $210 $212 year including a 26% increase in the acquisition of
Asset Type new high value clients;
Equity $111 $115 Significant referrals from other PNC lines of business,
Fixed Income 66 63 an increase of approximately 50% over 2010;
Liquidity/Other 33 34
Improved credit quality and performance;
Continuing levels of new business investment and
Total $210 $212
focused hiring to drive growth with nearly 300
Discretionary assets under management
external new hires; and
Personal $ 69 $ 69
Roll-out of PNC Wealth InsightSM, our new online
Institutional 38 39 client reporting tool.
Total $107 $108
Asset Type Assets under administration were $210 billion at December 31,
Equity $ 53 $ 55 2011 compared with $212 billion at December 31, 2010.
Fixed Income 38 36 Discretionary assets under management were $107 billion at
Liquidity/Other 16 17 December 31, 2011 compared with $108 billion at
Total $107 $108 December 31, 2010. The decrease in the comparisons was
Nondiscretionary assets under administration driven by the exit of pension related assets and flat equity
Personal $ 31 $ 30 markets on a comparative period end basis, offsetting strong
Institutional 72 74 sales performance and successful client retention.
Total $103 $104
Total revenue for 2011 was $887 million compared with $884
Asset Type
million for 2010. Net interest income was $238 million for
Equity $ 58 $ 60
2011 compared with $256 million for 2010. The decrease was
Fixed Income 28 27
attributable to lower loan yields, lower loan balances and
Liquidity/Other 17 17 lower interest credits assigned to deposits reflective of the
Total $103 $104 current low rate environment. Noninterest income was $649
(a) As of December 31. million for 2011, up $21 million from the prior year due to
(b) Includes nonperforming loans of $56 million at December 31, 2011 and $82 million
at December 31, 2010. stronger average equity markets, increased sales and new
(c) Recorded investment of purchased impaired loans related to acquisitions. client acquisition. Noninterest income in the prior year
(d) Excludes brokerage account assets. benefitted from approximately $19 million of tax, termination,
integration, and litigation related items that were not repeated
Asset Management Group earned $141 million for 2011 in 2011. Excluding these items in the comparison, total
compared with $137 million for 2010. Assets under noninterest income grew 6%.
administration were $210 billion at December 31, 2011 and
$212 billion at December 31, 2010. Earnings for 2011 Provision for credit losses was a benefit of $24 million for 2011
reflected a benefit from the provision for credit losses and reflecting improved credit quality compared with provision of
growth in noninterest income, partially offset by higher $20 million for 2010. Net charge-offs were immaterial in 2011
noninterest expense and lower net interest income. as charge-off activity was mitigated by significant recoveries
Noninterest expense increased due to continued strategic compared with net charge-offs of $42 million in 2010.
investments in the business including front-line sales staff and
new client facing technology. The core growth strategies for Noninterest expense was $687 million in 2011, an increase of
the business include: increasing channel penetration; investing $40 million or 6% from the prior year. The increase was
in higher growth geographies; and investing in differentiated attributable to investments in the business to drive growth and
client-facing technology. For 2011, the business delivered higher compensation-related costs. Asset Management Group
strong sales production, grew high value clients and benefited remains focused on disciplined expense management as it
from significant referrals from other PNC lines of business. invests in these strategic growth opportunities.
Over time and with stabilized market conditions, the
successful execution of these strategies and the accumulation Average deposits of $7.8 billion for 2011 increased $601
of our strong sales performance are expected to create million, or 8%, over the prior year. Average transaction
meaningful growth in assets under management and deposits grew 11% compared with 2010 and were partially
noninterest income. offset by the strategic run-off of higher rate certificates of
deposit in the comparison. Average loan balances of $6.1

58 The PNC Financial Services Group, Inc. Form 10-K

 Year ended December 31
billion decreased $194 million, or 3%, from the prior year Dollars in millions, except as noted 2011 2010
primarily due to credit risk management activities within the OTHER INFORMATION
portfolio offsetting new client acquisition. Loan origination volume (in billions) $11.4 $10.5
Percentage of originations represented by:
RESIDENTIAL MORTGAGE BANKING Agency and government programs 100% 99%
(Unaudited) Refinance volume 76% 74%
Year ended December 31 Total nonperforming assets (a) (b) $ 76 $ 172
Dollars in millions, except as noted 2011 2010 Purchased impaired loans (a) (c) $ 112 $ 161
INCOME STATEMENT (a) As of December 31.
Net interest income $ 201 $ 256 (b) Includes nonperforming loans of $31 million at December 31, 2011 and $109
million at December 31, 2010.
Noninterest income (c) Recorded investment of purchased impaired loans related to acquisitions.
Loan servicing revenue
Servicing fees 226 242 Residential Mortgage Banking earned $87 million in 2011
Net MSR hedging gains 220 245 compared with $269 million in 2010. The decline in earnings
Loan sales revenue 282 231 was driven by an increase in noninterest expense associated
Other 19 18 with increased costs for residential mortgage foreclosure-
Total noninterest income 747 736 related expenses, primarily as a result of ongoing
Total revenue 948 992 governmental matters, and lower net interest income, partially
Provision for credit losses 5 5 offset by an increase in loan originations and higher loans
Noninterest expense 797 563 sales revenue.
Pretax earnings 146 424
Income taxes 59 155 Highlights of Residential Mortgage Bankings performance
during 2011 include the following:
Earnings $ 87 $ 269
Total loan originations were $11.4 billion for 2011
A VERAGE BALANCE SHEET
compared with $10.5 billion in 2010. Refinance
Portfolio loans $ 2,771 $2,649
volume increased compared to the 2010 period.
Loans held for sale 1,492 1,322
Loans continue to be originated primarily through
Mortgage servicing rights (MSR) 905 1,017 direct channels under FNMA, FHLMC and FHA/VA
Other assets 6,102 4,259 agency guidelines.
Total assets $11,270 $9,247 Investors having purchased mortgage loans may
Deposits $ 1,675 $2,716 request PNC to indemnify them against losses on
Borrowings and other liabilities 3,877 2,823 certain loans or to repurchase loans that they believe
Capital 731 919 do not comply with applicable contractual loan
Total liabilities and equity $ 6,283 $6,458 origination covenants and representations and
PERFORMANCE RATIOS warranties we have made. At December 31, 2011, the
Return on average capital 12% 29% liability for estimated losses on repurchase and
Return on average assets .77 2.91
indemnification claims for the Residential Mortgage
Banking business segment was $83 million compared
Noninterest income to total revenue 79 74
with $144 million at December 31, 2010. See the
Efficiency 84 57
Recourse And Repurchase Obligations section of this
RESIDENTIAL MORTGAGE SERVICING Item 7 and Note 23 Commitments and Guarantees in
PORTFOLIO (in billions)
the Notes To Consolidated Financial Statements in
Beginning of period $ 125 $ 145
Item 8 of this Report for additional information.
Acquisitions 6
Residential mortgage loans serviced for others
Additions 12 10 totalled $118 billion at December 31, 2011 compared
Repayments/transfers (25) (30) with $125 billion at December 31, 2010 as payoffs
End of period $ 118 $ 125 continued to outpace new direct loan origination
Servicing portfolio statistics: (a) volume.
Fixed rate 90% 89% Noninterest income was $747 million in 2011
Adjustable rate/balloon 10% 11% compared with $736 million in 2010. The increase
Weighted-average interest rate 5.38% 5.62% resulted from higher loan sales revenue driven by
MSR capitalized value (in billions) $ .7 $ 1.0 higher loan origination volume, partially offset by
MSR capitalization value (in basis points) 54 82 lower net hedging gains on residential mortgage
Weighted-average servicing fee (in basis servicing rights and lower loan servicing revenue.
points) 29 30

The PNC Financial Services Group, Inc. Form 10-K 59

 Net interest income was $201 million in 2011
compared with $256 million in 2010. The decrease in
the comparison was primarily due to lower interest
earned on escrow deposits.
Noninterest expense was $797 million in 2011
compared with $563 million in 2010. The increase
from the prior year period was primarily due to
higher residential mortgage foreclosure-related
expenses, primarily as a result of ongoing
governmental matters.
The fair value of residential mortgage servicing
rights was $.7 billion at December 31, 2011
compared with $1.0 billion at December 31, 2010.
The decline in fair value was primarily due to lower
mortgage rates which has resulted in higher
prepayment rates.
BLACKROCK
(Unaudited)
Information related to our equity investment in BlackRock
follows:
Year ended December 31
Dollars in millions
Business segment earnings (a)
PNCs economic interest in BlackRock (b)
(a) Includes PNCs share of BlackRocks reported GAAP earnings net of additional
income taxes on those earnings incurred by PNC.
(b) At December 31.
In billions
Carrying value of PNCs
investment in BlackRock (c)
Market value of PNCs
investment in BlackRock (d)
(c) PNC accounts for its investment in BlackRock under the equity method of
accounting, exclusive of a related deferred tax liability of $1.7 billion at December
31, 2011 and $1.8 billion at December 31, 2010.
(d) Does not include liquidity discount.
60 The PNC Financial Services Group, Inc. Form 10-K
PNC accounts for its BlackRock Series C Preferred Stock at
fair value, which offsets the impact of marking-to-market the
obligation to deliver these shares to BlackRock to partially
fund BlackRock LTIP programs. The fair value amount of the
BlackRock Series C Preferred Stock is included on our
Consolidated Balance Sheet in the caption Other assets.
Additional information regarding the valuation of the
BlackRock Series C Preferred Stock is included in Note 8 Fair
Value in the Notes To Consolidated Financial Statements in
Item 8 of this Report.
On September 29, 2011, PNC transferred 1.3 million shares of
BlackRock Series C Preferred Stock to BlackRock to satisfy a
portion of our LTIP obligation. Upon transfer, Other assets
and Other liabilities on our Consolidated Balance Sheet were
reduced by $172 million, representing the fair value of the
shares transferred. Additional information regarding our
BlackRock LTIP shares obligation is included in Note 15
Stock Based Compensation Plans in the Notes To
Consolidated Financial Statements in Item 8 of this Report.
At December 31, 2011, approximately 1.5 million shares of
BlackRock Series C Preferred Stock were available to fund a
portion of awards under future BlackRock LTIP programs.
2011 2010
PNC accounts for its remaining investment in BlackRock
$361 $351
under the equity method of accounting. Our voting interest in
21% 20% BlackRock common stock (approximately 24% at
December 31, 2011) is higher than our overall share of
BlackRocks equity and earnings.
Dec. 31 Dec. 31
2011 2010
$5.3 $5.1
6.4 6.9
NON-STRATEGIC ASSETS PORTFOLIO This business segment (formerly Distressed Assets Portfolio)
(Unaudited) consists primarily of acquired non-strategic assets that fall
outside of our core business strategy. Non-Strategic Assets
Year ended December 31 Portfolio had earnings of $200 million in 2011 compared with
Dollars in millions 2011 2010
a loss of $57 million in 2010. The increase was primarily
INCOME STATEMENT
attributable to a lower provision for credit losses partially
Net interest income $ 913 $ 1,229
Noninterest income 47 (93)
offset by lower net interest income.
Total revenue 960 1,136
Provision for credit losses 366 976
Highlights of Non-Strategic Assets Portfolios performance
Noninterest expense 275 250
during 2011 include the following:
Pretax earnings (loss) 319 (90)
Average loans declined to $13.4 billion in 2011
Income taxes (benefit) 119 (33)
compared with $16.8 billion in 2010. The expected
Earnings (loss) $ 200 $ (57)
decline was driven by customer payment activity and
portfolio management activities to reduce under-
AVERAGE BALANCE SHEET
performing assets.
Commercial Lending:
Net interest income was $.9 billion in 2011 compared
Commercial/Commercial real estate $ 1,277 $ 2,240
with $1.2 billion in 2010. The decrease reflected
Lease financing 712 781
lower loan balances and related purchase accounting
Total commercial lending 1,989 3,021
accretion.
Consumer Lending:
Noninterest income was $47 million in 2011
Consumer 5,257 6,240
compared with a loss of $93 million in 2010. 2010
Residential real estate 6,161 7,585
included an increase to the liability for estimated
Total consumer lending 11,418 13,825
losses on repurchase and indemnification claims on
Total portfolio loans 13,407 16,846
brokered home equity loans sold to investors.
Other assets (a) (288) 671
The provision for credit losses was $366 million in
Total assets $13,119 $17,517
2011 compared with $976 million in 2010. The
Deposits and other liabilities $ 111 154
decline was driven primarily by lower losses in first
Capital 1,319 1,621
mortgage and residential construction portfolios.
Total liabilities and equity $ 1,430 $ 1,775
Noninterest expense in 2011 was $275 million
PERFORMANCE RATIOS compared with $250 million in 2010. The increase
Return on average capital 15% (4)% was driven by residential mortgage foreclosure-
Return on average assets 1.52 (.33) related expenses, primarily as a result of ongoing
OTHER INFORMATION governmental matters.
Nonperforming assets (b) (c) $ 1,024 $ 1,242 Nonperforming loans decreased to $.7 billion at
Purchased impaired loans (b) (d) $ 5,251 $ 5,879 December 31, 2011 compared with $.9 billion at
Net charge-offs (e) $ 370 $ 677 December 31, 2010. The consumer lending portfolio
Net charge-off ratio (e) 2.76% 4.02% comprised 66% of the nonperforming loans at
LOANS (b) December 31, 2011. Nonperforming consumer loans
Commercial Lending increased $20 million.
Commercial/Commercial real estate $ 976 $ 1,684 Net charge-offs were $370 million in 2011 and $677
Lease financing 670 764 million in 2010. The decrease was due to lower
Total commercial lending 1,646 2,448 charge-offs on residential real estate and commercial
Consumer Lending real estate loans.
Consumer 4,930 5,769
Residential real estate 5,840 6,564
Total consumer lending 10,770 12,333
Total loans $12,416 $14,781
(a) Other assets includes deferred taxes and loan reserves.
(b) As of December 31.
(c) Includes nonperforming loans of $.7 billion at December 31, 2011 and $.9 billion at
December 31, 2010.
(d) Recorded investment of purchased impaired loans related to acquisitions. At
December 31, 2011, this segment contained 79% of PNCs purchased impaired
loans.
(e) For the year ended December 31.

The PNC Financial Services Group, Inc. Form 10-K 61

The majority of assets within this portfolio were obtained
through acquisitions and fall outside of our core business
strategy. Consequently, the business activity of this segment is
to manage the wind-down of the portfolio assigned to it while
maximizing the value and mitigating risk. The fair value
marks taken upon acquisition of the assets, the team we have
in place, and targeted asset resolution strategies help us to
manage these assets. Additionally, our capital and liquidity
positions provide us flexibility in a challenging environment
to optimize returns on this portfolio for our shareholders.
The $12.4 billion of loans held in this portfolio at
December 31, 2011 are stated inclusive of a fair
value adjustment on purchased impaired loans at
acquisition. Taking the adjustment and the ALLL
into account, the net carrying basis of this loan
portfolio is 79% of customer outstandings.
The Commercial Lending portfolio within this
segment is comprised of $1.0 billion in residential
development loans (i.e. condominiums, townhomes,
developed and undeveloped land) and $.7 billion of
performing cross-border leases. This portfolio has
been reduced by 33% since December 31, 2010
driven by the decline in residential development
loans. The cross-border lease portfolio has been
relatively stable. These assets are long-term and are
of high credit quality.
The performance of the Consumer Lending portfolio
within this segment is dependent upon economic
growth, unemployment rates, the housing market
recovery and the interest rate environment. The
portfolios credit quality performance has stabilized
through actions taken by management over the last
three years. Approximately 76% of customers have
been current with principal and interest payments for
the past 12 months. Consumer Lending consists of
consumer loans, which are mainly brokered home
equity loans and lines of credit, and residential real
estate mortgages. The residential real estate mortgage
portfolio is composed of jumbo and ALT-A first lien
mortgages, non-prime first and second lien
mortgages and, to a lesser extent, residential
construction loans. Management has implemented
various refinance programs, line management
programs, and loss mitigation programs to mitigate
risks within these portfolios while assisting
borrowers to maintain homeownership when
possible.
When loans are sold, we may assume certain loan
repurchase obligations associated with those loans
primarily relating to situations where investors may
request PNC to indemnify them against losses or to
repurchase loans that they believe do not comply
with applicable contractual loan origination
covenants and representations and warranties we
have made. From 2005 to 2007, home equity loans
were sold with such contractual provisions. At
December 31, 2011, the liability for estimated losses
62 The PNC Financial Services Group, Inc. Form 10-K
on repurchase and indemnification claims for the
Non-Strategic Assets Portfolio business segment was
$47 million. No substantial additional reserves were
recorded in 2011. See the Recourse And Repurchase
Obligations section of this Item 7 and Note 23
Commitments and Guarantees in the Notes To
Consolidated Financial Statements included in Item 8
of this Report for additional information.
CRITICAL ACCOUNTING ESTIMATES
AND JUDGMENTS
Our consolidated financial statements are prepared by
applying certain accounting policies. Note 1 Accounting
Policies in the Notes To Consolidated Financial Statements in
Item 8 of this Report describes the most significant accounting
policies that we use. Certain of these policies require us to
make estimates or economic assumptions that may vary under
different assumptions or conditions and such variations may
significantly affect our reported results and financial position
for the period or in future periods.
Fair Value Measurements
We must use estimates, assumptions, and judgments when
assets and liabilities are required to be recorded at, or adjusted
to reflect, fair value.
Assets and liabilities carried at fair value inherently result in a
higher degree of financial statement volatility. Fair values and
the information used to record valuation adjustments for
certain assets and liabilities are based on either quoted market
prices or are provided by independent third-party sources,
including appraisers and valuation specialists, when available.
When such third-party information is not available, we
estimate fair value primarily by using cash flow and other
financial modeling techniques. Changes in underlying factors,
assumptions, or estimates in any of these areas could
materially impact our future financial condition and results of
operations.
PNC applies Fair Value Measurements and Disclosures (ASC
820). This guidance defines fair value as the price that would
be received to sell a financial asset or paid to transfer a
financial liability in an orderly transaction between market
participants at the measurement date. This guidance requires a
three level hierarchy for disclosure of assets and liabilities
recorded at fair value. The classification of assets and
liabilities within the hierarchy is based on whether the inputs
to the valuation methodology used in the measurement are
observable or unobservable.
The following sections of this Report provide further
information on this type of activity:
Fair Value Measurements included within this
Item 7, and
Note 8 Fair Value included in the Notes To
Consolidated Financial Statements in Item 8 of this
Report.
Allowances For Loan And Lease Losses And Unfunded
Loan Commitments And Letters Of Credit
We maintain the ALLL and the Allowance for Unfunded Loan
Commitments and Letters of Credit at levels that we believe to
be appropriate to absorb estimated probable credit losses
incurred in the loan portfolio and on these unfunded credit
facilities as of the balance sheet date. Our determination of the
allowances is based on periodic evaluations of the loan and
lease portfolios and unfunded credit facilities and other
relevant factors. This evaluation is inherently subjective as it
requires material estimates, all of which may be susceptible to
significant change, including, among others:
Probability of default (PD),
Loss given default (LGD),
Exposure at date of default (EAD),
Movement through delinquency stages,
Amounts and timing of expected future cash flows,
Value of collateral, and
Qualitative factors such as changes in current
economic conditions that may not be reflected in
historical results.
In determining the appropriateness of the ALLL, we make
specific allocations to impaired loans and allocations to
portfolios of commercial and consumer loans. We also
allocate reserves to provide coverage for probable losses
incurred in the portfolio at the balance sheet date based upon
current market conditions, which may not be reflected in
historical loss data. While allocations are made to specific
loans and pools of loans, the total reserve is available for all
credit losses.
Commercial lending is the largest category of credits and is
the most sensitive to changes in assumptions and judgments
underlying the determination of the ALLL. We have allocated
approximately $2.0 billion, or 46%, of the ALLL at
December 31, 2011 to the commercial lending category.
Consumer lending allocations are made based on historical
loss experience adjusted for recent activity. Approximately
$2.3 billion, or 54%, of the ALLL at December 31, 2011 have
been allocated to these consumer lending categories.
To the extent actual outcomes differ from our estimates,
additional provision for credit losses may be required that
would reduce future earnings. See the following for additional
information:
Allowances For Loan and Lease Losses and
Unfunded Loan Commitments and Letters of Credit
in the Credit Risk Management section of this Item 7
(which includes an illustration of the estimated
impact on the aggregate of the ALLL and allowance
for unfunded loan commitments and letters of credit
assuming we increased pool reserve loss rates for
certain loan categories), and
Note 5 Asset Quality and Allowances for Loan and
Lease Losses and Unfunded Loan Commitments and
Letters of Credit in the Notes To Consolidated
Financial Statements and Allocation Of Allowance
For Loan And Lease Losses in the Statistical
Information (Unaudited) section of Item 8 of this
Report.
Estimated Cash Flows On Purchased Impaired Loans
ASC 310-30 Loans and Debt Securities Acquired with
Deteriorated Credit Quality (formerly SOP 03-3) provides the
GAAP guidance for accounting for certain loans. These loans
have experienced a deterioration of credit quality from
origination to acquisition for which it is probable that the
investor will be unable to collect all contractually required
payments receivable, including both principal and interest.
In our assessment of credit quality deterioration, we must
make numerous assumptions, interpretations and judgments,
using internal and third-party credit quality information to
determine whether it is probable that we will be able to collect
all contractually required payments. This point in time
assessment is inherently subjective due to the nature of the
available information and judgment involved.
Those loans that qualify under ASC 310-30 are recorded at
fair value at acquisition, which involves estimating the
expected cash flows to be received. Measurement of the fair
value of the loan is based on the provisions of ASC 820. ASC
310-30 prohibits the carryover or establishment of an
allowance for loan losses on the acquisition date.
Subsequent to the acquisition of the loan, we are required to
continue to estimate cash flows expected to be collected over
the life of the loan. The measurement of expected cash flows
involves assumptions and judgments as to credit risk, interest
rate risk, prepayment risk, default rates, loss severity, payment
speeds and collateral values. All of these factors are inherently
subjective and can result in significant changes in the cash
flow estimates over the life of the loan. Such changes in
expected cash flows could increase future earnings volatility
due to increases or decreases in the accretable yield (i.e., the
difference between the undiscounted expected cash flows and
the recorded investment in the loan). The accretable yield is
recognized as interest income on a constant effective yield
method over the life of the loan. In addition, changes in
expected cash flows could result in the recognition of
impairment through provision for credit losses if the decline in
expected cash flows is attributable to a decline in credit
quality.
The PNC Financial Services Group, Inc. Form 10-K 63
Goodwill
Goodwill arising from business acquisitions represents the
value attributable to unidentifiable intangible elements in the
business acquired. Most of our goodwill relates to value
inherent in the Retail Banking and Corporate & Institutional
Banking businesses. The value of this goodwill is dependent
upon our ability to provide quality, cost effective services in
the face of competition from other market participants on a
national and, with respect to some products and services, an
international basis. We also rely upon continuing investments
in processing systems, the development of value-added
service features, and the ease of access by customers to our
services.
As such, the value of goodwill is supported by earnings, which
is driven by transaction volume and, for certain businesses, the
market value of assets under administration or for which
processing services are provided. Lower earnings resulting
from a lack of growth or our inability to deliver cost-effective
services over sustained periods can lead to impairment of
goodwill, which could result in a current period charge to
earnings. At least annually, in the fourth quarter, or more
frequently if events occur or circumstances have changed
significantly from the annual test date, management reviews
the current operating environment and strategic direction of
each reporting unit taking into consideration any events or
changes in circumstances that may have an effect on the unit.
For this review, inputs are generated and used in calculating
the fair value of the reporting unit, which is compared to its
carrying value. A reporting unit is defined as an operating
segment or one level below an operating segment. If the fair
value of the reporting unit exceeds its carrying amount, the
reporting unit is not considered impaired. However, if the fair
value of the reporting unit is less than its carrying amount, the
reporting units goodwill would be evaluated for impairment.
In this circumstance, the implied fair value of reporting unit
goodwill would be compared to the carrying amount of that
goodwill. If the carrying amount of goodwill exceeds the
implied fair value of goodwill, the difference is recognized as
an impairment loss. The implied fair value of reporting unit
goodwill is determined by assigning the fair value of a
reporting unit to its assets and liabilities (including any
unrecognized intangible assets) with the residual amount equal
to the implied fair value of goodwill as if the reporting unit
had been acquired in a business combination.
The fair values of our reporting units are determined using a
discounted cash flow valuation model, with assumptions
based upon market comparables, and in certain instances we
may also consider additional fair value market indicators.
Based on the results of our analysis, there have been no
impairment charges related to goodwill in 2011, 2010 or 2009.
Despite the impact of challenging market conditions and
Dodd-Frank regulations on earnings, we believe our Retail
Banking reporting unit is well positioned given expected long-
term growth in deposits (including the impact of continued run
off of higher rate CDs), its demonstrated ability to acquire
64 The PNC Financial Services Group, Inc. Form 10-K
new customers while retaining existing ones, based in part
upon a suite of best-in-class products that are continually
enhanced (e.g., Virtual Wallet, Business Bankings Cash
Flow OptionsSM, and credit cards), expansion into new
markets with above average demographic growth attributes,
cross-sell opportunities for existing and new customers, a
focus on retirement and investment services for the mass and
mass affluent customer sectors, a scale that helps lower per
unit cost for increased regulatory costs, and disciplined
expense management.
See Note 9 Goodwill and Other Intangible Assets in the Notes
To Consolidated Financial Statements in Item 8 of this Report
for additional information.
Lease Residuals
We provide financing for various types of equipment, aircraft,
energy and power systems, and rolling stock and automobiles
through a variety of lease arrangements. Direct financing
leases are carried at the sum of lease payments and the
estimated residual value of the leased property, less unearned
income. Residual value insurance or guarantees by
governmental entities provide support for a significant portion
of the residual value. Residual values are subject to judgments
as to the value of the underlying equipment that can be
affected by changes in economic and market conditions and
the financial viability of the residual guarantors and insurers.
Residual values are derived from historical remarketing
experience, secondary market contacts, and industry
publications. To the extent not guaranteed or assumed by a
third-party, or otherwise insured against, we bear the risk of
ownership of the leased assets. This includes the risk that the
actual value of the leased assets at the end of the lease term
will be less than the residual value, which could result in an
impairment charge and reduce earnings in the future. Residual
values are reviewed for impairment on an annual basis.
Revenue Recognition
We earn net interest and noninterest income from various
sources, including:
Lending,
Securities portfolio,
Asset management,
Customer deposits,
Loan sales and servicing,
Brokerage services,
Sale of loans and securities,
Certain private equity activities, and
Securities and derivatives trading activities including
foreign exchange.
We also earn fees and commissions from issuing loan
commitments, standby letters of credit and financial
guarantees, selling various insurance products, providing
treasury management services, providing merger and
acquisition advisory and related services, and participating in
certain capital markets transactions. Revenue earned on
interest-earning assets including unearned income in the
accretion of fair value adjustments on discounts recognized on
acquired or purchased loans is recognized based on the
constant effective yield of the financial instrument.
The timing and amount of revenue that we recognize in any
period is dependent on estimates, judgments, assumptions, and
interpretation of contractual terms. Changes in these factors
can have a significant impact on revenue recognized in any
period due to changes in products, market conditions or
industry norms.
Residential And Commercial Mortgage Servicing Rights
We elect to measure our residential mortgage servicing rights
(MSRs) at fair value. This election was made to be consistent
with our risk management strategy to hedge changes in the
fair value of these assets as described below. The fair value of
residential MSRs is estimated by using a cash flow valuation
model which calculates the present value of estimated future
net servicing cash flows, taking into consideration actual and
expected mortgage loan prepayment rates, discount rates,
servicing costs, and other economic factors which are
determined based on current market conditions.
Assumptions incorporated into the residential MSRs valuation
model reflect managements best estimate of factors that a
market participant would use in valuing the residential MSRs.
Although sales of residential MSRs do occur, residential
MSRs do not trade in an active market with readily observable
prices so the precise terms and conditions of sales are not
available. As a benchmark for the reasonableness of its
residential MSRs fair value, PNC obtains opinions of value
from independent parties (brokers). These brokers provided
a range (+/- 10 bps) based upon their own discounted cash
flow calculations of our portfolio that reflected conditions in
the secondary market, and any recently executed servicing
transactions. PNC compares its internally-developed
residential MSRs value to the ranges of values received from
the brokers. If our residential MSRs fair value falls outside of
the brokers ranges, management will assess whether a
valuation adjustment is warranted. For 2011 and 2010, PNCs
residential MSRs value has not fallen outside of the brokers
ranges. We consider our residential MSRs value to represent a
reasonable estimate of fair value.
Commercial MSRs are purchased or originated when loans are
sold with servicing retained. Commercial MSRs do not trade
in an active market with readily observable prices so the
precise terms and conditions of sales are not available.
Commercial MSRs are initially recorded at fair value and are
subsequently accounted for at the lower of amortized cost or
fair value. Commercial MSRs are periodically evaluated for
impairment. For purposes of impairment, the commercial
mortgage servicing rights are stratified based on asset type,
which characterizes the predominant risk of the underlying
financial asset. The fair value of commercial MSRs is
estimated by using an internal valuation model. The model
calculates the present value of estimated future net servicing
cash flows considering estimates of servicing revenue and
costs, discount rates and prepayment speeds.
PNC employs risk management strategies designed to protect
the value of MSRs from changes in interest rates and related
market factors. Residential MSRs values are economically
hedged with securities and derivatives, including interest-rate
swaps, options, and forward mortgage-backed and futures
contracts. As interest rates change, these financial instruments
are expected to have changes in fair value negatively
correlated to the change in fair value of the hedged residential
MSRs portfolio. The hedge relationships are actively managed
in response to changing market conditions over the life of the
residential MSRs assets. Commercial MSRs are economically
hedged at a macro level or with specific derivatives to protect
against a significant decline in interest rates. Selecting
appropriate financial instruments to economically hedge
residential or commercial MSRs requires significant
management judgment to assess how mortgage rates and
prepayment speeds could affect the future values of MSRs.
Hedging results can frequently be less predictable in the short
term, but over longer periods of time are expected to protect
the economic value of the MSRs.
The fair value of residential and commercial MSRs and
significant inputs to the valuation model as of December 31,
2011 are shown in the tables below. The expected and actual
rates of mortgage loan prepayments are significant factors
driving the fair value. Management uses a third-party model to
estimate future residential loan prepayments and internal
proprietary models to estimate future commercial loan
prepayments. These models have been refined based on
current market conditions. Future interest rates are another
important factor in the valuation of MSRs. Management
utilizes market implied forward interest rates to estimate the
future direction of mortgage and discount rates. The forward
rates utilized are derived from the current yield curve for U.S.
dollar interest rate swaps and are consistent with pricing of
capital markets instruments. Changes in the shape and slope of
the forward curve in future periods may result in volatility in
the fair value estimate.
Residential Mortgage Servicing Rights
Dollars in millions
December 31
2011
December 31
2010
Fair value $ 647 $1,033
Weighted-average life (in years) (a) 3.6 5.8
Weighted-average constant
prepayment rate (a) 22.10% 12.61%
Weighted-average option adjusted
spread 11.77% 12.18%
(a) Changes in weighted-average life and weighted-average constant prepayment rate
reflect the cumulative impact of changes in rates, prepayment expectations and
model changes.
The PNC Financial Services Group, Inc. Form 10-K 65
Commercial Mortgage Servicing Rights Commercial Mortgage Servicing Rights

December 31 December 31 December 31 December 31

Dollars in millions 2011 2010 Dollars in millions 2011 2010

Fair value $ 471 $ 674 Prepayment rate range:

Weighted-average life (in years) (a) 5.9 6.3 Decline in fair value from 10% adverse
change $ 6 $ 8
Prepayment rate range (a) (b) 13% 28% 10% 24%
Decline in fair value from 20% adverse
Effective discount rate range 6% 9% 7% 9% change $11 $16
(a) Changes in weighted-average life and prepayment rate reflect the cumulative impact Effective discount rate range:
of changes in rates, prepayment expectations and model changes. Decline in fair value from 10% adverse
(b) Represents modeled prepayment rates considering the effective dates of prepayment
change $ 9 $13
penalties.
Decline in fair value from 20% adverse
change $18 $26
A sensitivity analysis of the hypothetical effect on the fair
value of MSRs to adverse changes in key assumptions is
presented below. These sensitivities do not include the impact Income Taxes
of the related hedging activities. Changes in fair value In the normal course of business, we and our subsidiaries enter
generally cannot be extrapolated because the relationship of into transactions for which the tax treatment is unclear or
the change in the assumption to the change in fair value may subject to varying interpretations. In addition, filing
not be linear. Also, the effect of a variation in a particular requirements, methods of filing and the calculation of taxable
assumption on the fair value of the MSRs is calculated income in various state and local jurisdictions are subject to
independently without changing any other assumption. In differing interpretations.
reality, changes in one factor may result in changes in another
(for example, changes in mortgage interest rates, which drive We evaluate and assess the relative risks and merits of the
changes in prepayment rate estimates, could result in changes appropriate tax treatment of transactions, filing positions,
in the interest rate spread), which could either magnify or filing methods and taxable income calculations after
counteract the sensitivities. considering statutes, regulations, judicial precedent, and other
information, and maintain tax accruals consistent with our
Residential Mortgage Servicing Rights evaluation of these relative risks and merits. The result of our
evaluation and assessment is by its nature an estimate. We and
December 31 December 31 our subsidiaries are routinely subject to audit and challenges
Dollars in millions 2011 2010 from taxing authorities. In the event we resolve a challenge for
Weighted-average constant prepayment an amount different than amounts previously accrued, we will
rate: account for the difference in the period in which we resolve
Decline in fair value from 10% adverse the matter.
change $44 $41
Decline in fair value from 20% adverse
change $84 $86 Proposed Accounting Standards
Weighted-average option adjusted spread:
The Financial Accounting Standards Board (FASB) issued
several Exposure Drafts for comment during 2011 as well as
Decline in fair value from 10% adverse
change $25 $43 the beginning of 2012.
Decline in fair value from 20% adverse
change $48 $83

66 The PNC Financial Services Group, Inc. Form 10-K

In November 2011, the FASB issued Proposed Accounting
Standards Update Consolidation (Topic 810) Principal
versus Agent Analysis. This proposal would require a
reporting entity to evaluate whether a decision maker is using
its power as a principal or an agent. This evaluation would
affect whether an entity is a variable interest entity and, if so,
whether the reporting entity should consolidate the entity. The
principal or agent decision would be based on the rights held
by other parties, the compensation received by the decision
maker and the decision makers exposure to variability of
returns from any other interests that it holds in the entity. This
proposal would change the evaluation of kick-out and
participating rights held by noncontrolling shareholders in a
consolidation analysis. Additionally, the proposal would
impact the requirements for determining when a general
partner controls a limited partnership. Lastly, the proposal
would rescind the indefinite deferral of variable interest entity
analysis provided for an investment manager and other similar
entities. The comment period ended February 15, 2012. We
are evaluating the impact of this proposal on our financial
statements.
In November 2011, the FASB issued Proposed Accounting
Standards Update (Revised) Revenue Recognition (Topic
605) Revenue from Contracts with Customers. Under the
proposal, an entity would recognize revenue from contracts
with customers when it transfers promised goods or services
to the customer. The revenue recognized would be the
transaction price based upon the consideration promised by
the customer in exchange for the transferred goods or services.
The proposal includes guidance on how to determine when a
good or service is transferred over time, how to account for
warranties, how to determine a transaction price (including
collectability, time value of money, and variable
consideration), and a practical expedient that permits an entity
to recognize as an expense costs of obtaining a contract (if one
year or less). The effective date has not yet been determined.
The comment period ends on March 13, 2012. On January 4,
2012, the FASB issued a second proposal on Revenue
Recognition that illustrates the proposed amendments to the
FASB Accounting Standards Codification, which were
excluded from the first proposal issued in November 2011.
The comment period for the second proposal also ends on
March 13, 2012. We are evaluating the impact of these
proposals on our financial statements.
In October 2011, the FASB issued Proposed Accounting
Standards Update Financial Services Investment
Companies (Topic 946). This proposal would change the
definition of an investment company. Additionally, it would
require that an investment company consolidate another
investment company in which it holds a controlling financial
interest. Consistent with current U.S. GAAP, a noninvestment
company parent of an investment company would continue to
retain the specialized consolidation accounting. The effective
date has not yet been determined. The comment period ended
February 15, 2012. We are evaluating the impact of this
proposal on our financial statements.
In October 2011, the FASB also issued Proposed Accounting
Standards Update Real Estate Investment Property Entities
(Topic 973). This proposal provides accounting guidance for
an entity that meets the criteria to be an investment property
entity. Investment properties acquired by an investment
property entity would be required to be recorded at fair value
with changes in value recorded in earnings. The effective date
has not yet been determined. The comment period ended
February 15, 2012. We are evaluating the impact of this
proposal on our financial statements.
In January 2011, the FASB issued Supplementary Document
Accounting for Financial Instruments and Revisions to the
Accounting for Derivative Instruments and Hedging
Activities Impairment. Subsequent to this proposal, in June
2011, the FASB and IASB proposed a credit impairment
model that would divide loans into three buckets for purposes
of calculating impairment. The three buckets are:
(1) portfolios with little to no evidence of credit impairment,
(2) portfolios with observable evidence of credit impairment,
and (3) individual instruments that are credit impaired. The
proposed impairment calculations for the three buckets are as
follows: (1) expected losses for the next 12 months for
portfolios of instruments, (2) expected lifetime losses for
portfolios of instruments, and (3) expected lifetime losses for
individual instruments, respectively. All instruments would be
initially classified in bucket 1 and transition to
buckets 2 and 3 if credit performance deteriorates from
origination or acquisition. This proposal continues to be
discussed among the FASB and IASB. A new exposure draft
is expected to be issued in the second quarter of 2012. We are
evaluating the impact of this proposal on our financial
statements.
Recent Accounting Pronouncements
See Note 1 Accounting Policies in the Notes To the
Consolidated Financial Statements in Item 8 of this Report
regarding the impact of new accounting pronouncements.
The PNC Financial Services Group, Inc. Form 10-K 67

STATUS OF QUALIFIED DEFINED
BENEFIT PENSION PLAN
We have a noncontributory, qualified defined benefit pension
plan (plan or pension plan) covering eligible employees.
Benefits are determined using a cash balance formula where
earnings credits are a percentage of eligible compensation.
Pension contributions are based on an actuarially determined
amount necessary to fund total benefits payable to plan
participants. Consistent with our investment strategy, plan
assets are primarily invested in equity investments and fixed
income instruments. Plan fiduciaries determine and review the
plans investment policy, which is described more fully in
Note 14 Employee Benefit Plans in the Notes To Consolidated
Financial Statements in Item 8 of this Report.
We calculate the expense associated with the pension plan and
the assumptions and methods that we use include a policy of
reflecting trust assets at their fair market value. On an annual
basis, we review the actuarial assumptions related to the
pension plan. The primary assumptions used to measure
pension obligations and costs are the discount rate,
compensation increase and expected long-term return on
assets. Among these, the compensation increase assumption
does not significantly affect pension expense.
The discount rate used to measure pension obligations is
determined by comparing the expected future benefits that
will be paid under the plan with yields available on high
quality corporate bonds of similar duration. In lower interest
rate environments, the sensitivity of pension expense to the
assumed discount rate increases. The impact on pension
expense of a 0.5% decrease in discount rate in the current
environment is $23 million per year. In contrast, the
sensitivity to the same change in discount rate in a higher
interest rate environment is less significant.
The expected long-term return on assets assumption also has a
significant effect on pension expense. The expected return on
plan assets is a long-term assumption established by
considering historical and anticipated returns of the asset
classes invested in by the pension plan and the asset allocation
policy currently in place. For purposes of setting and
reviewing this assumption, long term refers to the period
over which the plans projected benefit obligations will be
disbursed. We review this assumption at each measurement
date and adjust it if warranted. Our selection process
references certain historical data and the current environment,
but primarily utilizes qualitative judgment regarding future
return expectations. Accordingly, we generally do not change
the assumption unless we modify our investment strategy or
identify events that would alter our expectations of future
returns.
68 The PNC Financial Services Group, Inc. Form 10-K
To evaluate the continued reasonableness of our assumption,
we examine a variety of viewpoints and data. Various studies
have shown that portfolios comprised primarily of US equity
securities have historically returned approximately 10%
annually over long periods of time, while US debt securities
have returned approximately 6% annually over long periods.
Application of these historical returns to the plans allocation
ranges for equities and bonds produces a result between 7.25%
and 8.75% and is one point of reference, among many other
factors, that is taken into consideration. We also examine the
plans actual historical returns over various periods. Recent
experience is considered in our evaluation with appropriate
consideration that, especially for short time periods, recent
returns are not reliable indicators of future returns. While
annual returns can vary significantly (rates of return for 2011,
2010, and 2009 were +.11%, +14.87%, and +20.61%,
respectively), the selected assumption represents our estimated
long-term average prospective returns.
Acknowledging the potentially wide range for this
assumption, we also annually examine the assumption used by
other companies with similar pension investment strategies, so
that we can ascertain whether our determinations markedly
differ from others. In all cases, however, this data simply
informs our process, which places the greatest emphasis on
our qualitative judgment of future investment returns, given
the conditions existing at each annual measurement date.
Taking into consideration all of these factors, the expected
long-term return on plan assets for determining net periodic
pension cost for 2011 was 7.75%, down from 8.00% for 2010.
This reduction was made after considering the views of both
internal and external capital market advisors, particularly with
regard to the effects of the recent economic environment on
long-term prospective fixed income returns. We are
maintaining our expected long-term return on assets at 7.75%
for determining pension cost for 2012.
Under current accounting rules, the difference between
expected long-term returns and actual returns is accumulated
and amortized to pension expense over future periods. Each
one percentage point difference in actual return compared
with our expected return causes expense in subsequent years
to increase or decrease by up to $8 million as the impact is
amortized into results of operations.
We currently estimate a pretax pension expense of $93 million
in 2012 compared with pretax expense of $3 million in 2011.
This year-over-year expected increase is primarily due to the
amortization impact of the unfavorable 2011 investment
returns as compared with the expected long-term return
assumption and the increase in obligations due to the drop in
the discount rate. In addition, the estimate for 2012 includes
approximately $2 million for employees expected to join the
plan after the RBC Bank (USA) acquisition.
The table below reflects the estimated effects on pension
expense of certain changes in annual assumptions, using 2012
estimated expense as a baseline.
Increase to 2012
Change in Assumption (a)
.5% decrease in discount rate
.5% decrease in expected long-term return on assets
.5% increase in compensation rate
(a) The impact is the effect of changing the specified assumption while holding all other
assumptions constant.
Our pension plan contribution requirements are not
particularly sensitive to actuarial assumptions. Investment
performance has the most impact on contribution requirements
and will drive the amount of permitted contributions in future
years. Also, current law, including the provisions of the
Pension Protection Act of 2006, sets limits as to both
minimum and maximum contributions to the plan. We do not
expect to be required by law to make any contributions to the
plan during 2012.
We maintain other defined benefit plans that have a less
significant effect on financial results, including various
nonqualified supplemental retirement plans for certain
employees.
RECOURSE AND REPURCHASE
OBLIGATIONS
As discussed in Note 3 Loan Sale and Servicing Activities and
Variable Interest Entities in the Notes To Consolidated
Financial Statements in Item 8 of this Report, PNC has sold
commercial mortgage and residential mortgage loans directly
or indirectly in securitizations and whole-loan sale
transactions with continuing involvement. One form of
continuing involvement includes certain recourse and loan
repurchase obligations associated with the transferred assets in
these transactions.
Commercial Mortgage Loan Recourse Obligations
We originate, close, and service certain multi-family
commercial mortgage loans which are sold to FNMA under
FNMAs Delegated Underwriting and Servicing (DUS)
program. We participated in a similar program with the
FHLMC.
Under these programs, we generally assume up to a one-third
pari passu risk of loss on unpaid principal balances through a
loss share arrangement. At December 31, 2011 and
December 31, 2010, the unpaid principal balance outstanding
of loans sold as a participant in these programs was $13.0
billion and $13.2 billion, respectively. The potential maximum
exposure under the loss share arrangements was $4.0 billion at
both December 31, 2011 and December 31, 2010. We
maintain a reserve for estimated losses based on our exposure.
The reserve for losses under these programs totaled $47
million and $54 million as of December 31, 2011 and
Estimated December 31, 2010, respectively, and is included in Other
Pension liabilities on our Consolidated Balance Sheet. If payment is
Expense
(In millions) required under these programs, we would not have a
$23
contractual interest in the collateral underlying the mortgage
loans on which losses occurred, although the value of the
$18
collateral is taken into account in determining our share of
$ 2 such losses. Our exposure and activity associated with these
recourse obligations are reported in the Corporate &
Institutional Banking segment.
Residential Mortgage Loan and Home Equity Repurchase
Obligations
While residential mortgage loans are sold on a non-recourse
basis, we assume certain loan repurchase obligations
associated with mortgage loans we have sold to investors.
These loan repurchase obligations primarily relate to
situations where PNC is alleged to have breached certain
origination covenants and representations and warranties
made to purchasers of the loans in the respective purchase and
sale agreements. Residential mortgage loans covered by these
loan repurchase obligations include first and second-lien
mortgage loans we have sold through Agency securitizations,
Non-Agency securitizations, and whole-loan sale transactions.
As discussed in Note 3 in the Notes To Consolidated Financial
Statements in Item 8 of this Report, Agency securitizations
consist of mortgage loans sale transactions with FNMA,
FHLMC, and the Government National Mortgage Association
(GNMA) program, while Non-Agency securitizations and
whole-loan sale transactions consist of mortgage loans sale
transactions with private investors. Our historical exposure
and activity associated with Agency securitization repurchase
obligations has primarily been related to transactions with
FNMA and FHLMC, as indemnification and repurchase losses
associated with Federal Housing Agency (FHA) and
Department of Veterans Affairs (VA)-insured and uninsured
loans pooled in GNMA securitizations historically have been
minimal. Repurchase obligation activity associated with
residential mortgages is reported in the Residential Mortgage
Banking segment.
PNCs repurchase obligations also include certain brokered
home equity loans/lines that were sold to a limited number of
private investors in the financial services industry by National
City prior to our acquisition. PNC is no longer engaged in the
brokered home equity lending business, and our exposure
under these loan repurchase obligations is limited to
repurchases of the whole-loans sold in these transactions.
Repurchase activity associated with brokered home equity
lines/loans are reported in the Non-Strategic Assets Portfolio
segment.
Loan covenants and representations and warranties are
established through loan sale agreements with various
investors to provide assurance that PNC has sold loans to
The PNC Financial Services Group, Inc. Form 10-K 69
investors of sufficient investment quality. Key aspects of such us no longer having indemnification and repurchase exposure
covenants and representations and warranties include the with the investor in the transaction.
loans compliance with any applicable loan criteria established
by the investor, including underwriting standards, delivery of The following table details the unpaid principal balance of our
all required loan documents to the investor or its designated unresolved indemnification and repurchase claims at
party, sufficient collateral valuation, and the validity of the December 31, 2011 and December 31, 2010.
lien securing the loan. As a result of alleged breaches of these
contractual obligations, investors may request PNC to Analysis of Unresolved Asserted Indemnification and
indemnify them against losses on certain loans or to Repurchase Claims
repurchase loans.
Dec. 31 Dec. 31
In millions 2011 2010
Indemnifications for loss or loan repurchases typically occur
Residential mortgages:
when, after review of the claim, we agree insufficient
evidence exists to dispute the investors claim that a breach of Agency securitizations $302 $110
a loan covenant and representation and warranty has occurred, Private investors (a) 73 100
such breach has not been cured, and the effect of such breach
Home equity loans/lines:
is deemed to have had a material and adverse effect on the
value of the transferred loan. Depending on the sale agreement Private investors (b) 110 299
and upon proper notice from the investor, we typically Total unresolved claims $485 $509
respond to such indemnification and repurchase requests (a) Activity relates to loans sold through Non-Agency securitization and whole-loan
sale transactions.
within 60 days, although final resolution of the claim may take
(b) Activity relates to brokered home equity loans/lines sold through whole-loan sale
a longer period of time. With the exception of the sales transactions which occurred during 2005-2007.
agreements associated with the Agency securitizations, most
sale agreements do not provide for penalties or other remedies To mitigate losses associated with indemnification and
if we do not respond timely to investor indemnification or repurchase claims, we have established quality assurance
repurchase requests. programs designed to ensure loans sold meet specific
underwriting and origination criteria provided for in the
Investor indemnification or repurchase claims are typically investor sale agreements. In addition, we investigate every
settled on an individual loan basis through make-whole investor claim on a loan by loan basis to determine the
payments or loan repurchases; however, on occasion we may existence of a legitimate claim, and that all other conditions
negotiate pooled settlements with investors. In connection for indemnification or repurchase have been met prior to the
with pooled settlements, we typically do not repurchase loans settlement with an investor.
and the consummation of such transactions generally results in

The table below details our indemnification and repurchase claim settlement activity during 2011 and 2010.

Analysis of Indemnification and Repurchase Claim Settlement Activity

2011 2010
Unpaid Fair Value of Unpaid Fair Value of
Principal Losses Repurchased Principal Losses Repurchased
Year ended December 31 In millions Balance (a) Incurred (b) Loans (c) Balance (a) Incurred (b) Loans (c)
Residential mortgages (d):
Agency securitizations $220 $115 $74 $358 $151 $150
Private investors (e) 76 48 14 127 54 31

Home equity loans/lines:

Private investors Repurchases (f) (g) 42 107 3 28 35 3
Total indemnification and repurchase settlements $338 $270 $91 $513 $240 $184
(a) Represents unpaid principal balance of loans at the indemnification or repurchase date. Excluded from these balances are amounts associated with pooled settlement payments as loans
are typically not repurchased in these transactions.
(b) Represents both i) amounts paid for indemnification/settlement payments and ii) the difference between loan repurchase price and fair value of the loan at the repurchase date. These
losses are charged to the indemnification and repurchase liability.
(c) Represents fair value of loans repurchased only as we have no exposure to changes in the fair value of loans or underlying collateral when indemnification/settlement payments are
made to investors.
(d) Repurchase activity associated with insured loans, government-guaranteed loans, and loans repurchased through the exercise of our removal of account provision (ROAP) option are
excluded from this table. Refer to Note 3 in the Notes To Consolidated Financial Statements in Item 8 of this Report for further discussion of ROAPs.
(e) Activity relates to loans sold through Non-Agency securitizations and whole-loan sale transactions.
(f) Activity relates to brokered home equity loans/lines sold through whole-loan sale transactions which occurred during 2005-2007.
(g) Included in the Losses Incurred column are payments associated with pooled settlement activities. These payments were made to settle disputed pending repurchase claims as well as
any future repurchase claims made by investors. No loans were repurchased in these transactions and accordingly, balances associated with these activities are not included in the
Unpaid Principal Balance and Fair Value of Repurchased Loans columns in this table.

70 The PNC Financial Services Group, Inc. Form 10-K

During 2011 and 2010, unresolved and settled investor
indemnification and repurchase claims were primarily related to
one of the following alleged breaches in representations and
warranties: 1) misrepresentation of income, assets or
employment; 2) property evaluation or status issues (e.g.,
appraisal, title, etc.); 3) underwriting guideline violations; or 4)
mortgage insurance rescissions. During 2011, the volume of
residential mortgage indemnification and repurchase claims
increased reflecting the prolonged weak residential housing
sector and the continuing industry trend of Agency investors
pursuing strategies to aggressively reduce their exposure to
losses on purchased loans. This increase, along with an increase
in the average time to resolve investor claims, has contributed
to the higher balances of unresolved claims for residential
mortgages at December 31, 2011. The extended period of time
to resolve these investor claims coupled with higher claim
rescission rates drove the decline in residential mortgage
indemnification and repurchase settlement activity in 2011. As
the level of residential mortgage claims increased over the past
couple of years, management focused its efforts on improving
its process to review and respond to these claims. The lower
balance of unresolved indemnification and repurchase claims
for home equity loans/lines at December 31, 2011 was
primarily attributed to pooled settlement activity and higher
claim rescission rates during 2011. Management also
implemented enhancements to its process of reviewing and
responding to investor claims for this sold portfolio. The pooled
settlement activity also drove the year-over-year increase in
home equity indemnification and repurchase settlements. As a
result, certain investor indemnification and repurchase requests
received in 2010 were not resolved until the pooled settlement
activity occurred in 2011.
For the first and second-lien mortgage balances of unresolved
and settled claims contained in the tables above, a significant
amount of these claims were associated with sold loans
originated through correspondent lender and broker
origination channels. For the home equity loans/lines sold
portfolio, all unresolved and settled claims relate to loans
originated through the broker origination channel. In certain
instances when indemnification or repurchase claims are
settled for these types of sold loans, we have recourse back to
the correspondent lenders, brokers and other third-parties
(e.g., contract underwriting companies, closing agents,
appraisers, etc.). Depending on the underlying reason for the
investor claim, we determine our ability to pursue recourse
with these parties and file claims with them accordingly. Our
historical recourse recovery rate has been insignificant as our
efforts have been impacted by the inability of such parties to
reimburse us for their recourse obligations (e.g., their capital
availability or whether they remain in business) or contractual
limitations that limit our ability to pursue recourse with these
parties (e.g., loss caps, statutes of limitations, etc.). Broker
recourse activities, to the extent material, as well as the trends
in unresolved claim and indemnification and repurchase
activity described above are considered in the determination
of our estimated indemnification and repurchase liability
detailed below.
Origination and sale of residential mortgages is an ongoing
business activity and, accordingly, management continually
assesses the need to recognize indemnification and repurchase
liabilities pursuant to the associated investor sale agreements.
We establish indemnification and repurchase liabilities for
estimated losses on sold first and second-lien mortgages and
home equity loans/lines for which indemnification is expected
to be provided or for loans that are expected to be
repurchased. For the first and second-lien mortgage sold
portfolio, we have established an indemnification and
repurchase liability pursuant to investor sale agreements based
on claims made and our estimate of future claims on a loan by
loan basis. These relate primarily to loans originated during
2006-2008. For the home equity loans/lines sold portfolio, we
have established indemnification and repurchase liabilities
based upon this same methodology for loans sold during
2005-2007.
Indemnification and repurchase liabilities, which are included
in Other liabilities on the Consolidated Balance Sheet, are
initially recognized when loans are sold to investors and are
subsequently evaluated by management. Initial recognition
and subsequent adjustments to the indemnification and
repurchase liability for the sold residential mortgage portfolio
are recognized in Residential mortgage revenue on the
Consolidated Income Statement. Since PNC is no longer
engaged in the brokered home equity lending business, only
subsequent adjustments are recognized to the home equity
loans/lines indemnification and repurchase liability. These
adjustments are recognized in Other noninterest income on the
Consolidated Income Statement.
Managements subsequent evaluation of these indemnification
and repurchase liabilities is based upon trends in
indemnification and repurchase requests, actual loss
experience, risks in the underlying serviced loan portfolios,
and current economic conditions. As part of its evaluation,
management considers estimated loss projections over the life
of the subject loan portfolio. We believe our indemnification
and repurchase liabilities appropriately reflect the estimated
probable losses on investor indemnification and repurchase
claims at December 31, 2011 and December 31, 2010.
At December 31, 2011 and December 31, 2010, the liability
for estimated losses on indemnification and repurchase claims
for residential mortgages totaled $83 million and $144
million, respectively. The year-over-year decline in this
liability reflects lower estimated losses driven primarily by the
seasoning of the sold portfolio and higher claim rescission
rates as described above. This decrease resulted despite higher
levels of investor indemnification and repurchase claim
activity. The indemnification and repurchase liability for
home equity loans/lines was $47 million and $150 million at
The PNC Financial Services Group, Inc. Form 10-K 71
December 31, 2011 and December 31, 2010, respectively. The
year-over-year reduction in this liability was reflective of
lower anticipated indemnification and repurchase activity for
the sold portfolio due to pooled settlement activities, improved
investor rescission rates as described above, and the seasoning
of the sold home equity portfolio.
RISK MANAGEMENT
We encounter risk as part of the normal course of operating
our business and we design risk management processes to help
manage these risks. This Risk Management section describes
our risk management philosophy, principles, governance and
various aspects of our corporate-level risk management
program. We also provide an analysis of our primary areas of
risk: credit, operational, model, liquidity, and market. The
discussion of market risk is further subdivided into interest
rate, trading, and equity and other investment risk areas. Our
use of financial derivatives as part of our overall asset and
liability risk management process is also addressed within the
Risk Management section of this Item 7. In appropriate places
within this section, historical performance is also addressed.
Risk Management Philosophy and Profile
We fundamentally believe that risk management is a critical
activity in successfully operating our business. We have
adopted and implemented a risk philosophy with a goal of
managing to an overall moderate level of risk to capture
opportunities and optimize shareholder value. We actively
support a risk management culture which promotes
communication, teamwork, and our governance structure to
help us manage our risks in the best interest of our business
and shareholders. We dynamically set our strategies and make
distinct risk taking decisions with consideration for the impact
to our aggregate risk position. During 2011, our corporate risk
profile returned to an overall moderate level due to continued
improvement in a number of key measures, disciplined credit
management, and the successful execution and
implementation of strategic business initiatives.
Risk Management Principles
In managing the risks we encounter, we employ the following
accepted guiding principles to establish boundaries for the
risks which we are willing to accept in the course of doing
business. These include being able to effectively:
Identify and Understand Risks and Returns
Make Balanced Risk Decisions
Monitor and Manage Risks
Risk Management Governance
We employ a comprehensive Risk Management governance
structure to help ensure that risks are identified; balanced
decisions are made that consider risk and return; and risks are
adequately monitored and managed. Risk committees
established within this governance structure provide oversight
for risk management activities at the Board, Corporate, and
Business level. We utilize our governance structure to assess
72 The PNC Financial Services Group, Inc. Form 10-K
the effectiveness of our Risk Management practices on an
ongoing basis, based on how we manage our day-to-day
business activities and on our development and execution of
more specific strategies to mitigate risks. Our businesses strive
to enhance risk management and internal control processes in
light of heightened regulatory expectations focused on large
financial institutions. We have integrated and comprehensive
processes in place that are designed to adequately identify,
measure, manage, monitor, and report risks which may
significantly impact our business. The roles and
responsibilities for our Risk Management activities rest with
the following groups:
Line of Business Management and corporate support
functions have the responsibility for identifying and managing
risks generated in day-to-day business activities. This includes
performing quality assurance testing on processes to identify
risks and implementing necessary mitigation measures; setting
control level policies and procedures designed to manage
program execution within boundaries defined by risk
management; and supporting risk reporting activities and
escalation of key risks.
Risk Management supports business management in meeting
their responsibilities for managing risk in a partnership role by
proactively assessing risk, as well as an oversight role of
measuring, monitoring, and challenging firm-wide risk
management capabilities. This includes establishing enterprise
level risk management policies that govern the control level
policies, performing quality control on process outcomes,
establishing appropriate governance and challenge functions
via the risk committees, and creating risk transparency
through ownership of risk reporting activities.
Internal Audit develops a risk-based audit program to help
provide assurance on the management of risk throughout the
organization. This includes auditing business processes across
the organization and reporting on the effectiveness of controls,
as well as auditing the risk management policy and
infrastructure implemented by the enterprise risk management
function.
Corporate-Level Risk Management Program
The corporate risk management organization has the following
key roles:
Facilitate the identification, assessment and
monitoring of risk across PNC,
Provide support and oversight to the businesses,
Help identify and implement risk management best
practices, as appropriate, and
Work with the lines of business to shape and define
PNCs business risk limits.
Risk Measurement
We conduct risk measurement activities specific to each area
of risk utilizing a variety of methodologies. The primary
vehicle for aggregation of enterprise-wide risk is a
comprehensive risk management methodology which focuses
on maximizing economic capital. This primary risk
aggregation measure is supplemented with secondary
measures of risk to arrive at an estimate of corporate-wide
risk. The economic capital framework is a measure of
potential losses above and beyond expected losses. Our capital
management practices incorporate risks associated with
potential credit losses (Credit Risk); fluctuations of the
estimated market value of financial instruments (Market
Risk); failure of people, processes or systems (Operational
Risk); calculations, assumptions, and validation of internal
measurements (Model Risk); and losses associated with
declining margins and/or fees, and the fixed cost structure of
the business. We estimate credit and market risks at pool and
exposure levels while we estimate the remaining risk types at
an institution or business segment level.
Risk Management Strategies
Risk management is not about eliminating risks, but about
identifying and accepting risks and then working to effectively
manage them so as to optimize all aspects of shareholder
value.
We centrally manage policy development, exception approval,
and oversight through our corporate-level risk management
structure. Some of these policies express our risk appetite
through limits to the acceptable level of risk. If we are in
excess of certain limits, we implement strategies designed to
progressively manage our risks to be within acceptable
tolerances. We also review and revise certain policies to better
reflect specific business requirements of our changing
organization. This risk management structure also affords us
opportunities to take action in either preventing or mitigating
unapproved exceptions to policies. PNCs Internal Audit
function also performs its own assessment of our internal
control environment. Internal Audit plays a critical role in risk
management, testing the operation of the internal control
system and reporting findings to management and to the Audit
Committee of the Board.
Risk Monitoring and Reporting
Monitoring and evaluation of controls help to provide
assurance that controls are effective, and can also result in the
identification of opportunities to improve risk controls. Our
risk reporting provides an overall risk aggregation and
transparent communication of these aggregated risks. Risk
reports are produced at the line of business level, the
functional level (credit, market, operational), and at the
corporate level. Our enterprise risk profile is a point-in-time
assessment of corporate-wide risk. The risk profile represents
PNCs overall risk position in relation to the desired corporate
risk appetite. The determination of the risk profiles position is
based on comprehensive and subjective analysis of reported
risk limits, metrics, operating guidelines, and qualitative
assessments.
CREDIT RISK MANAGEMENT
Credit risk represents the possibility that a customer,
counterparty or issuer may not perform in accordance with
contractual terms. Credit risk is inherent in the financial
services business and results from extending credit to
customers, purchasing securities, and entering into financial
derivative transactions and certain guarantee contracts. Credit
risk is one of our most significant risks. Our processes for
managing credit risk are embedded in PNCs risk culture and
in our decision-making processes using a systematic approach
whereby credit risks and related exposures are: identified and
assessed; managed through specific policies and processes;
measured and evaluated against our risk tolerance limits; and
reported, along with specific mitigation activities, to
management and the board through our governance structure.
Asset Quality Overview
Overall asset quality trends for 2011 were positive and
included the following:
Overall loan delinquencies, excluding government
insured or guaranteed loans, have declined from
year-end 2010 levels helped by the slowly improving
economy.
Aided by a continued, albeit slowly, improving
economy, nonperforming loans declined $906
million, or 20%, to $3.6 billion as of December 31,
2011 compared with December 31, 2010. Similarly,
nonperforming assets decreased $967 million, or
19%, to $4.2 billion as of December 31, 2011,
compared with December 31, 2010.
Commercial credit quality trends improved
noticeably with levels of criticized commercial loan
outstandings declining by approximately $3.8 billion,
or 28% compared with December 31, 2010, to $9.9
billion at December 31, 2011. See Note 5 Asset
Quality and Allowances for Loan and Lease Losses
and Unfunded Loan Commitments and Letters of
Credit in the Notes To Consolidated Financial
Statements in Item 8 of this Report for additional
information.
Net charge-offs declined significantly to $1.6 billion,
down 44% from 2010 net charge-offs of $2.9 billion.
Reflecting improvements in asset quality, the
provision for credit losses declined to $1.2 billion for
2011 compared with $2.5 billion for 2010.
The level of ALLL has decreased to $4.3 billion at
December 31, 2011 from $4.9 billion at
December 31, 2010.
These positive trends were partially offset by our ongoing loan
modification efforts to assist homeowners and other
borrowers. These efforts continued to increase our overall
level of troubled debt restructurings (TDRs). In particular,
TDRs included in nonperforming loans increased to 32% of
total nonperforming loans. However, as the economy has
slowly improved, the amount of TDRs returning to performing
status has increased.
The PNC Financial Services Group, Inc. Form 10-K 73
NONPERFORMING ASSETS AND LOAN DELINQUENCIES Nonperforming Assets By Type
Nonperforming Assets, including OREO and Foreclosed Dec. 31 Dec. 31
Assets In millions 2011 2010
Nonperforming assets include nonaccrual loans and leases for Nonperforming loans
which ultimate collectability of the full amount of contractual Commercial
principal and interest is not probable and include TDRs, Retail/wholesale trade $ 109 $ 197
OREO and foreclosed assets. Loans held for sale, government Manufacturing 117 250
insured or guaranteed loans, purchased impaired loans and Service providers 147 218
loans accounted for under the fair value option are excluded
Real estate related (a) 252 233
from nonperforming loans. Additional information regarding
Financial services 36 16
our nonaccrual policies is included in Note 1 Accounting
Policies in the Notes To Consolidated Financial Statements in Health care 29 50
Item 8 of this Report. A summary of nonperforming assets is Other industries 209 289
presented in the table below. Total commercial 899 1,253
Commercial real estate
Nonperforming assets decreased $967 million from Real estate projects 1,051 1,422
December 31, 2010, to $4.2 billion at December 31, 2011. Commercial mortgage 294 413
Nonperforming loans decreased $906 million to $3.6 billion Total commercial real estate 1,345 1,835
while OREO and foreclosed assets decreased $61 million to Equipment lease financing 22 77
$596 million. The ratio of nonperforming assets to total loans
TOTAL COMMERCIAL LENDING 2,266 3,165
and OREO and foreclosed assets was 2.60% at December 31,
Consumer (b)
2011 and 3.39% at December 31, 2010. The ratio of
nonperforming loans to total loans declined to 2.24% at Home equity 529 448
December 31, 2011, compared to 2.97% at December 31, Residential real estate
2010. The decrease in nonperforming loans from Residential mortgage (c) 685 764
December 31, 2010 occurred across all loan classes except for Residential construction 41 54
home equity and credit card. Home equity nonperforming Credit card (d) 8
loans continued to increase as a result of the extended period Other consumer 31 35
of time to exit problem loans from the portfolio and the TOTAL CONSUMER LENDING 1,294 1,301
additions of modifications which result in TDRs. Total Total nonperforming loans (e) 3,560 4,466
nonperforming assets have declined $2.3 billion, or 35%, from OREO and foreclosed assets
their peak of $6.4 billion at March 31, 2010. Other real estate owned (OREO) (f) 561 589
Foreclosed and other assets 35 68
At December 31, 2011, TDRs included in nonperforming
loans increased to $1.1 billion or 32% of total nonperforming TOTAL OREO AND FORECLOSED
ASSETS 596 657
loans compared to $784 million or 18% of nonperforming
Total nonperforming assets $4,156 $5,123
loans as of December 31, 2010. Within consumer
nonperforming loans, residential real estate TDRs comprise Amount of commercial lending
nonperforming loans contractually current
51% of total residential real estate nonperforming loans at
as to remaining principal and interest $ 632 $ 988
December 31, 2011, up from 30% at December 31, 2010.
Percentage of total commercial lending
Similarly, home equity TDRs comprise 77% of home equity nonperforming loans 28% 31%
nonperforming loans at December 31, 2011, up slightly from
Amount of TDRs included in nonperforming
75% at December 31, 2010. The level of TDRs in these loans $1,141 $ 784
portfolios is expected to result in elevated nonperforming loan
Percentage of total nonperforming loans 32% 18%
levels for longer periods because TDRs remain in
Nonperforming loans to total loans 2.24% 2.97%
nonperforming status until a borrower has made at least six
consecutive months of payments under the modified terms or Nonperforming assets to total loans, OREO
and foreclosed assets 2.60 3.39
ultimate resolution occurs.
Nonperforming assets to total assets 1.53 1.94
At December 31, 2011, our largest nonperforming asset was Allowance for loan and lease losses to total
$28 million in the Accommodation and Food Services nonperforming loans (e) (g) 122 109
Industry and our average nonperforming loan associated with (a) Includes loans related to customers in the real estate and construction industries.
(b) Excludes most consumer loans and lines of credit, not secured by residential real
commercial lending was under $1 million. Our ten largest estate, which are charged off after 120 to 180 days past due and are not placed on
outstanding nonperforming assets are all from the commercial nonperforming status.
lending portfolio and represent 9% and 5% of total (c) Effective in 2011, nonperforming residential mortgage excludes loans of $61 million
accounted for under the fair value option as of December 31, 2011. The comparable
commercial lending nonperforming loans and total balance at December 31, 2010 was not material.
nonperforming assets, respectively, as of December 31, 2011.

74 The PNC Financial Services Group, Inc. Form 10-K

(d) Effective in the second quarter 2011, the commercial nonaccrual policy was applied
to certain small business credit card balances. This change resulted in loans being
placed on nonaccrual status when they become 90 days or more past due. We
continue to charge off these loans at 180 days past due.
(e) Nonperforming loans do not include government insured or guaranteed loans, loans
held for sale, loans accounted for under the fair value option and purchased impaired
loans.
(f) Other real estate owned excludes $280 million and $178 million at December 31,
2011 and December 31, 2010, respectively, related to residential real estate that was
acquired by us upon foreclosure of serviced loans because they are insured by the
Federal Housing Administration (FHA) or guaranteed by the Department of
Veterans Affairs (VA).
(g) The allowance for loan and lease losses includes impairment reserves attributable to
purchased impaired loans. See Note 5 Asset Quality and Allowances for Loan and
Lease Losses and Unfunded Loan Commitments and Letters of Credit in the Notes
To Consolidated Financial Statements in Item 8 of this Report for additional
information.
OREO and Foreclosed Assets
Dec. 31 Dec. 31
In millions 2011 2010
Other real estate owned (OREO):
Residential properties $191 $304
Residential development properties 183 166
Commercial properties 187 119
Total OREO 561 589
Foreclosed and other assets 35 68
OREO and foreclosed assets $596 $657
Total OREO and foreclosed assets decreased $61 million
during 2011 from $657 million at December 31, 2010, to $596
million at December 31, 2011, which represents 14% of total
nonperforming assets. As of December 31, 2011 and
December 31, 2010, 32% and 46%, respectively, of our
OREO and foreclosed assets were comprised of single family
residential properties. The lower level of OREO and
foreclosed assets was driven by lower levels of residential
properties as new foreclosures have fallen from the very high
levels of early 2010 and sales of foreclosed properties have
rebounded from the low point in the fourth quarter 2010,
partially offset by an increase in commercial properties which
was due to an increase in the average balance added to OREO
with commercial property sales remaining constant year over
year. Excluded from OREO at December 31, 2011 and
December 31, 2010, respectively, was $280 million and $178
million of residential real estate that was acquired by us upon
foreclosure of serviced loans because they are insured by the
Federal Housing Administration (FHA) or guaranteed by the
Department of Veterans Affairs (VA).
Change in Nonperforming Assets
In millions 2011 2010
January 1 $5,123 $6,204
New nonperforming assets 3,625 5,213
Charge-offs and valuation adjustments (1,220) (2,071)
Principal activity, including paydowns and
payoffs (1,960) (1,316)
Asset sales and transfers to loans held for
sale (613) (1,446)
Returned to performing status (799) (1,461)
December 31 $4,156 $5,123
The table above presents nonperforming asset activity for the
years ended December 31, 2011 and 2010. Nonperforming
assets decreased $967 million from $5.1 billion at
December 31, 2010, to $4.2 billion at December 31, 2011.
Approximately 80% of total nonperforming loans are secured
by collateral, which would be expected to reduce credit losses
and require less reserves in the event of default, and 28% of
commercial lending nonperforming loans are contractually
current as to principal and interest. As of December 31, 2011,
commercial nonperforming loans are carried at approximately
62% of their unpaid principal balance, due to charge-offs
recorded to date, before consideration of the allowance for
loan and lease losses.
Purchased impaired loans are considered performing, even if
contractually past due (or if we do not expect to receive
payment in full based on the original contractual terms), as we
are currently accreting interest income over the expected life
of the loans. The accretable yield represents the excess of the
expected cash flows on the loans at the measurement date over
the carrying value. Generally decreases, other than interest
rate decreases for variable rate notes, in the net present value
of expected cash flows of individual commercial or pooled
consumer purchased impaired loans would result in an
impairment charge to the provision for loan losses in the
period in which the change is deemed probable. Generally
increases in the net present value of expected cash flows of
purchased impaired loans would first result in a recovery of
previously recorded allowance for loan losses, to the extent
applicable, and then an increase to accretable yield for the
remaining life of the purchased impaired loans. Total
nonperforming loans and assets in the tables above are
significantly lower than they would have been due to this
accounting treatment for purchased impaired loans. This
treatment also results in a lower ratio of nonperforming loans
to total loans and a higher ratio of ALLL to nonperforming
loans. See Note 6 Purchased Impaired Loans in the Notes To
Consolidated Financial Statements in Item 8 of this Report for
additional information on these loans.
The PNC Financial Services Group, Inc. Form 10-K 75
Loan Delinquencies Accruing loans past due 90 days or more are referred to as late
We regularly monitor the level of loan delinquencies and stage delinquencies. These loans are not included in
believe these levels may be a key indicator of loan portfolio nonperforming loans and continue to accrue interest because
asset quality. Measurement of delinquency status is based on they are well secured by collateral, are in the process of
the contractual terms of each loan. Loans that are 30 days or collection and are reasonably expected to result in repayment
more past due in terms of payment are considered delinquent. or restoration to current status, or are managed in homogenous
Loan delinquencies exclude loans held for sale and purchased portfolios with specified charge-off timeframes adhering to
impaired loans, but include government insured or guaranteed regulatory guidelines. These loans increased 10% from $2.7
loans. billion at December 31, 2010, to $3.0 billion at December 31,
2011, reflecting higher government insured delinquent
Total early stage loan delinquencies (accruing loans past due residential real estate and other consumer loans, primarily
30 to 89 days) decreased by $252 million from December 31, education loans, and higher delinquent home equity loans,
2010, to $1.6 billion at December 31, 2011. Commercial partially offset by improvement in commercial lending
lending early stage delinquencies declined by $245 million delinquency levels, primarily commercial real estate. The
from December 31, 2010, while consumer lending following tables display the delinquency status of our accruing
delinquencies fell by $7 million. Improvement in early stage loans past due at December 31, 2011 and December 31, 2010.
delinquency levels was experienced across most loan classes, Additional information regarding accruing loans past due is
offset by modest increases in government insured, primarily included in Note 5 Asset Quality and Allowances for Loan
other consumer education loans, and home equity. and Lease Losses and Unfunded Loan Commitments and
Letters of Credit in the Notes To Consolidated Financial
Statements in Item 8 of this Report.
Accruing Loans Past Due 30 To 59 Days
Amount Percent of Total Outstandings
Dec. 31 Dec. 31 Dec. 31 Dec. 31
Dollars in millions 2011 2010 2011 2010
Commercial $ 122 $ 251 .19% .45%
Commercial real estate 96 128 .59 .71
Equipment lease financing 22 37 .34 .58
Home equity 173 159 .52 .47
Residential real estate
Non government insured 180 226 1.24 1.41
Government insured 122 105 .84 .66
Credit card 38 46 .96 1.17
Other consumer
Non government insured 58 95 .30 .56
Government insured 207 165 1.08 .97
Total $1,018 $1,212 .64 .81

Accruing Loans Past Due 60 To 89 Days

Amount Percent of Total Outstandings
Dec. 31 Dec. 31 Dec. 31 Dec. 31
Dollars in millions 2011 2010 2011 2010
Commercial $ 47 $ 92 .07% .17%
Commercial real estate 35 62 .22 .35
Equipment lease financing 5 2 .08 .03
Home equity 114 91 .34 .27
Residential real estate
Non government insured 72 107 .50 .67
Government insured 104 118 .72 .74
Credit card 25 32 .63 .82
Other consumer
Non government insured 21 32 .11 .19
Government insured 124 69 .65 .41
Total $547 $605 .34 .40

76 The PNC Financial Services Group, Inc. Form 10-K

Accruing Loans Past Due 90 Days Or More
Amount Percent of Total Outstandings
Dec. 31 Dec. 31 Dec. 31 Dec. 31
Dollars in millions 2011 2010 2011 2010
Commercial $ 49 $ 59 .07% .11%
Commercial real estate 6 43 .04 .24
Equipment lease financing 1 .02
Home equity 221 174 .67 .51
Residential real estate
Non government insured 152 160 1.05 1.00
Government insured 2,129 1,961 14.71 12.26
Credit card 48 77 1.21 1.96
Other consumer
Non government insured 23 28 .12 .16
Government insured 345 206 1.80 1.22
Total $2,973 $2,709 1.87 1.80

Our Special Asset Committee closely monitors primarily
commercial loans that are not included in the nonperforming
or accruing past due categories and for which we are uncertain
about the borrowers ability to comply with existing
repayment terms over the next six months. These loans totaled
$438 million at December 31, 2011 and $574 million at
December 31, 2010.
Home Equity Loan Portfolio
Our home equity loan portfolio totaled $33.1 billion as of
December 31, 2011, or 21% of the total loan portfolio. Of that
total, $22.5 billion, or 68%, was outstanding under primarily
variable-rate home equity lines of credit and $10.6 billion, or
32%, consisted of closed-end home equity installment loans.
Less than 2% of the home equity portfolio was on
nonperforming status as of December 31, 2011.
As of December 31, 2011, we are in an originated first lien
position for approximately 33% of the total portfolio and,
where originated as a second lien, we currently hold or service
the first lien position for approximately an additional 2% of
the portfolio. Historically, we have originated and sold first
mortgages which has resulted in a low percentage of home
equity loans where we hold the first lien mortgage position.
The remaining 65% of the portfolio was secured by second
liens where we do not hold the first lien position. For the
majority of the home equity portfolio where we are in, hold or
service the first lien position, the credit performance of this
portion of the portfolio is superior to the portion of the
portfolio where we hold the second lien position but do not
hold the first lien.
Subsequent to origination, PNC is not typically notified when
a senior lien position that is not held by PNC is satisfied.
Therefore, information about the current lien status of the
loans is limited, for loans that were originated in subordinated
lien positions where PNC does not also hold the senior lien, to
what can be obtained from external sources.
PNC contracted with a third-party service provider to provide
updated loan, lien and collateral data that is aggregated from
public and private sources. We started receiving the data in
late 2011 and we are working with the third-party provider to
enhance the information we are receiving. As we have made
progress in our efforts, we have incrementally enhanced our
risk management processes and reporting to incorporate this
updated loan, lien, and collateral data, and we anticipate being
substantially complete by the end of second quarter 2012.
We track borrower performance monthly and other credit
metrics at least quarterly, including historical performance of
any mortgage loans regardless of lien position that we may or
may not hold, updated FICO scores and original and updated
LTVs. This information is used for internal risk management
reporting and monitoring. We segment the population into
pools based on product type (e.g., home equity loans, brokered
home equity loans, home equity lines of credit, brokered home
equity lines of credit). We also further segment certain loans
based upon the delinquency status of any mortgage loan with
the same borrower (regardless of whether it is a first lien
senior to our second lien).
In establishing our ALLL, we utilize a delinquency roll-rate
methodology for pools of loans. In accordance with accounting
principles, under this methodology, we establish our allowance
based upon incurred losses and not lifetime expected losses.
The roll-rate methodology estimates transition/roll of loan
balances from one delinquency state (e.g., 30-59 days past due)
to another delinquency state (e.g., 60-89 days past due) and
ultimately charge-off. The roll through to charge-off is based on
PNCs actual loss experience for each type of pool. Since a pool
may consist of first and second liens, the charge-off amounts for
the pool are proportionate to the composition of first and second
liens in the pool. Our experience has been that the ratio of first
to second lien loans has been consistent over time and is
appropriately represented in our pools used for roll-rate
calculations.

The PNC Financial Services Group, Inc. Form 10-K 77

Generally, our variable-rate home equity lines of credit have
either a seven or ten year draw period, followed by a 20 year
amortization term. During the draw period, we have home
equity lines of credit where borrowers pay interest only and
home equity lines of credit where borrowers pay principal and
interest. Based upon outstanding balances at December 31,
2011, the following table presents the periods when home
equity lines of credit draw periods are scheduled to end.
Home Equity Lines of Credit - Draw Period End Dates
Interest Only
In millions Product
2012 $ 904
2013 1,211
2014 2,043
2015 1,988
2016 and thereafter 6,961
Total (a) $13,107
(a) Includes approximately $306 million, $44 million, $60 million, $100 million, and
$246 million of home equity lines of credit with balloon payments with draw
periods scheduled to end in 2012, 2013, 2014, 2015, and 2016 and thereafter,
respectively.
We view home equity lines of credit where borrowers are
paying principal and interest under the draw period as less
risky than those where the borrowers are paying interest only,
as these borrowers have a demonstrated ability to make some
level of principal and interest payments.
Based upon outstanding balances, and excluding purchased
impaired loans, at December 31, 2011, for home equity lines
of credit for which the borrower can no longer draw (e.g.,
draw period has ended or borrowing privileges have been
terminated), approximately 4.32% were 30-89 days past due
and approximately 5.57% were greater than or equal to 90
days past due. Generally, when a borrower becomes 60 days
past due, we terminate borrowing privileges, and those
privileges are not subsequently reinstated. At that point, we
continue our collection/recovery processes, which may
include a loss mitigation loan modification resulting in a loan
that is classified as a TDR.
See Note 5 Asset Quality and Allowances for Loan and Lease
Losses and Unfunded Loan Commitments and Letters of
Credit in the Notes To Consolidated Financial Statements in
Item 8 of this Report for additional information.
LOAN MODIFICATIONS AND TROUBLED DEBT
RESTRUCTURINGS
Consumer Loan Modifications
We modify loans under government and PNC-developed
programs based upon our commitment to help eligible
homeowners and borrowers avoid foreclosure, where
78 The PNC Financial Services Group, Inc. Form 10-K
appropriate. Initially, a borrower is evaluated for a
modification under a government program. If a borrower does
not qualify under a government program, the borrower is then
evaluated under a PNC program. Our programs utilize both
temporary and permanent modifications and typically reduce
the interest rate, extend the term and/or defer principal.
Temporary and permanent modifications under programs
involving a change to loan terms are generally classified as
TDRs. Further, certain payment plans and trial payment
arrangements which do not include a contractual change to
loan terms may be classified as TDRs. Additional detail on
Principal and
Interest Product TDRs is discussed below as well as in Note 5 Asset Quality
$ 266 and Allowances for Loan and Lease Losses and Unfunded
Loan Commitments and Letters of Credit in the Notes To
331
Consolidated Financial Statements in Item 8 of this Report.
598
820 A temporary modification, with a term between three and 60
5,601 months, involves a change in original loan terms for a period
$7,616 of time and reverts to the original loan terms as of a specific
date or the occurrence of an event, such as a failure to pay in
accordance with the terms of the modification. Typically,
these modifications are for a period of up to 24 months after
which the interest rate reverts to the original loan rate. A
permanent modification, with a term greater than 60 months,
is a modification in which the terms of the original loan are
changed. Permanent modifications primarily include the
government-created Home Affordable Modification Program
(HAMP) or PNC-developed HAMP-like modification
programs.
For consumer loan programs, such as residential mortgages
and home equity loans and lines, we will enter into a
temporary modification when the borrower has indicated a
temporary hardship and a willingness to bring current the
delinquent loan balance. Examples of this situation often
include delinquency due to illness or death in the family, or a
loss of employment. Permanent modifications are entered into
when it is confirmed that the borrower does not possess the
income necessary to continue making loan payments at the
current amount, but our expectation is that payments at lower
amounts can be made. Residential mortgage and home equity
loans and lines have been modified with changes in terms for
up to 60 months, although the majority involve periods of
three to 24 months.
We also monitor the success rates and delinquency status of
our loan modification programs to assess their effectiveness in
serving our customers needs while mitigating credit losses.
The following tables provide the number of accounts and
unpaid principal balance of modified consumer real estate
related loans as well as the number of accounts and unpaid
principal balance of modified loans that were 60 days or more
past due as of six months, nine months and twelve months
after the modification date.
Bank-Owned Consumer Real Estate Related Loan Modifications

December 31, 2011 December 31, 2010

Unpaid Unpaid
Number of Principal Number of Principal
Dollars in millions Accounts Balance Accounts Balance
Home Equity
Temporary Modifications 13,352 $1,215 12,643 $1,151
Permanent Modifications 1,533 92 163 17
Total Home Equity 14,885 1,307 12,806 1,168
Residential Mortgages
Permanent Modifications 7,473 1,342 5,517 1,137
Non-Prime Mortgages
Permanent Modifications 4,355 610 3,405 441
Residential Construction
Permanent Modifications 1,282 578 470 235
Total Bank-Owned Consumer Real Estate Related Loan Modifications 27,995 $3,837 22,198 $2,981

Bank-Owned Consumer Real Estate Related Loan Modifications Re-Default by Vintage (a) (b)

Six Months Nine Months Twelve Months

Number of % of Number of % of Number of % of Unpaid
December 31, 2011 Accounts Vintage Accounts Vintage Accounts Vintage Principal
Dollars in millions, except as noted Re-defaulted Re-defaulted Re-defaulted Re-defaulted Re-defaulted Re-defaulted Balance (c)
Permanent Modifications
Home Equity (d)
Second Quarter 2011 17 4.9%
First Quarter 2011 1 2.8 2 5.6%
Fourth Quarter 2010 4 14.3 6 21.4 5 17.9%
Third Quarter 2010 1 9.1 2 18.2 1 9.1
Second Quarter 2010 2 12.5 4 25.0 4 25.0
Residential Mortgages
Second Quarter 2011 391 28.0 $68.1
First Quarter 2011 361 21.9 511 31.0 82.6
Fourth Quarter 2010 338 18.3 536 29.1 689 37.4 111.7
Third Quarter 2010 479 24.6 577 29.6 684 35.1 112.4
Second Quarter 2010 303 21.3 384 26.9 447 31.4 68.2
Non-Prime Mortgages
Second Quarter 2011 119 19.6 20.7
First Quarter 2011 78 18.4 105 24.8 13.3
Fourth Quarter 2010 13 13.5 24 25.0 28 29.2 4.4
Third Quarter 2010 93 18.3 110 21.6 137 26.9 17.4
Second Quarter 2010 99 23.2 107 25.1 123 28.9 16.6
Residential Construction
Second Quarter 2011 4 3.8 1.2
First Quarter 2011 7 4.2 10 6.0 3.1
Fourth Quarter 2010 11 4.7 17 7.2 25 10.6 6.8
Third Quarter 2010 24 8.2 26 8.9 27 9.2 4.0
Second Quarter 2010 37 13.6 38 13.9 39 14.3 10.6
Temporary Modifications
Home Equity
Second Quarter 2011 74 10.8 7.0
First Quarter 2011 99 6.6 169 11.3 15.2
Fourth Quarter 2010 131 6.5 265 13.1 344 17.0 31.6
Third Quarter 2010 142 6.9 246 12.0 368 18.0 32.5
Second Quarter 2010 165 7.9 260 12.4 347 16.6 29.0

The PNC Financial Services Group, Inc. Form 10-K 79

(a) An account is considered in re-default if it is 60 days or more delinquent after modification. The data in this table represents loan modifications completed during the quarter ending
June 30, 2010 through June 30, 2011 and represents a vintage look at all quarterly accounts and the number of those modified accounts (for each quarterly vintage) 60 days or more
delinquent at six, nine, and twelve months after modification. Account totals include active and inactive accounts that were delinquent when they achieved inactive status.
(b) Vintage refers to the quarter in which the modification occurred.
(c) Reflects December 31, 2011 unpaid principal balances of the re-defaulted accounts for the Second Quarter 2011 Vintage at Six Months, for the First Quarter 2011 Vintage at Nine
Months, and for Fourth Quarter 2010 and prior Vintages at Twelve Months.
(d) The unpaid principal balance for permanent home equity modifications totals less than $1 million for each vintage.
In addition to temporary loan modifications, we may make
available to a borrower a payment plan or a HAMP trial
payment period. Under a payment plan or a HAMP trial
payment period, there is no change to the loans contractual
terms so the borrower remains legally responsible for payment
of the loan under its original terms. A payment plan involves
the borrower making payments that differ from the contractual
payment amount for a short period of time, generally three
months, during which time a borrower is brought current. Our
motivation is to allow for repayment of an outstanding past
due amount through payment of additional amounts over the
short period of time. Due to the short term nature of the
payment plan there is a minimal impact to the ALLL.
Under a HAMP trial payment period, we allow a borrower to
demonstrate successful payment performance before
establishing an alternative payment amount. Subsequent to
successful borrower performance under the trial payment
period, we will change a loans contractual terms. As the
borrower is often already delinquent at the time of
participation in the HAMP trial payment period, upon
successful completion, there is not a significant increase in the
ALLL. If the trial payment period is unsuccessful, the loan
will be charged off at the end of the trial payment period to its
estimated fair value of the underlying collateral less costs to
sell.
Residential conforming and certain residential construction
loans have been permanently modified under HAMP or, if
they do not qualify for a HAMP modification, under
PNC-developed programs, which in some cases may operate
similarly to HAMP. These programs first require a reduction
of the interest rate followed by an extension of term and, if
appropriate, deferral of principal payments. As of
December 31, 2011 and December 31, 2010, 2,701 accounts
with a balance of $478 million and 1,027 accounts with a
balance of $262 million, respectively, of residential real estate
loans have been modified under HAMP and were still
outstanding on our balance sheet.
We do not re-modify a defaulted modified loan except for
subsequent significant life events, as defined by the OCC. A
re-modified loan continues to be classified as a TDR for the
remainder of its term regardless of subsequent payment
performance.
80 The PNC Financial Services Group, Inc. Form 10-K
Commercial Loan Modifications and Payment Plans
Modifications of terms for large commercial loans are based
on individual facts and circumstances. Commercial loan
modifications may involve reduction of the interest rate,
extension of the term of the loan and/or forgiveness of
principal. Modified large commercial loans are usually
already nonperforming prior to modification.
Beginning in 2010, we established certain commercial loan
modification and payment programs for small business loans,
Small Business Administration loans, and investment real
estate loans. As of December 31, 2011 and December 31,
2010, $81 million and $88 million, respectively, in loan
balances were covered under these modification and payment
plan programs. Of these loan balances, $24 million have been
determined to be TDRs as of December 31, 2011. No balances
were considered TDRs at December 31, 2010. As noted
below, we adopted new TDR guidance, effective retroactively
to January 1, 2011.
Troubled Debt Restructurings
In the third quarter of 2011, we adopted new accounting
guidance pertaining to TDRs, which was effective retroactive
to January 1, 2011. For additional information, see Note 1
Accounting Policies and Note 5 Asset Quality and Allowances
for Loan and Lease Losses and Unfunded Loan Commitments
and Letters of Credit in the Notes To Consolidated Financial
Statements in Item 8 of this Report. A TDR is a loan whose
terms have been restructured in a manner that grants a
concession to a borrower experiencing financial difficulties.
TDRs typically result from our loss mitigation activities and
include rate reductions, principal forgiveness, postponement/
reduction of scheduled amortization, and extensions, which
are intended to minimize economic loss and to avoid
foreclosure or repossession of collateral. For the year ended
December 31, 2011, $2.7 billion of loans held for sale, loans
accounted for under the fair value option, pooled purchased
impaired loans, as well as certain consumer government
insured or guaranteed loans which were evaluated for TDR
consideration, are not classified as TDRs.
Summary of Troubled Debt Restructurings Loan Charge-Offs And Recoveries

Dec. 31 Dec. 31 Year ended

In millions 2011 2010 December 31 Percent of
Dollars in millions Charge-offs Recoveries Net Charge-offs Average Loans
Consumer lending:
2011
Real estate-related $1,492 $1,087
Commercial $ 700 $332 $ 368 .62%
Credit card (a) 291 331
Commercial
Other consumer 15 4 real estate 464 105 359 2.14
Total consumer lending 1,798 1,422 Equipment
Total commercial lending 405 236 lease
Total TDRs $2,203 $1,658 financing 35 50 (15) (.24)
Nonperforming $1,141 $ 784 Home equity 484 48 436 1.30
Accruing (b) 771 543 Residential real
estate 153 11 142 .95
Credit card (a) 291 331
Credit card 235 23 212 5.62
Total TDRs $2,203 $1,658
Other consumer 193 56 137 .79
(a) Includes credit cards and certain small business and consumer credit agreements
whose terms have been restructured and are TDRs. However, since our policy is to Total $2,264 $625 $1,639 1.08
exempt these loans from being placed on nonaccrual status as permitted by
regulatory guidance as generally these loans are directly charged off in the period
2010
that they become 180 days past due, these loans are excluded from nonperforming Commercial $1,227 $294 $ 933 1.72%
loans.
(b) Accruing loans have demonstrated a period of at least six months of performance Commercial
under the restructured terms and are excluded from nonperforming loans. real estate 670 77 593 2.90
Equipment
Total TDRs increased $545 million or 33% during 2011 to lease
$2.2 billion as of December 31, 2011. Of this total, financing 120 56 64 1.02
nonperforming TDRs totaled $1.1 billion, which represents Home equity 488 41 447 1.28
approximately 32% of total nonperforming loans. However, as Residential real
the economy has continued to slowly improve, the amount of estate 406 19 387 2.19
TDRs returning to performing status has been increasing as Credit card 335 20 315 7.94
noted below.
Other consumer 246 49 197 1.74
TDRs that have returned to performing (accruing) status are Total $3,492 $556 $2,936 1.91
excluded from nonperforming loans. These loans have
demonstrated a period of at least six months of consecutive Total net charge-offs are significantly lower than they would
performance under the restructured terms. These TDRs have been otherwise due to the accounting treatment for
increased $228 million or 42% during 2011 to $771 million as purchased impaired loans. This treatment also results in a
of December 31, 2011. This increase reflects the further lower ratio of net charge-offs to average loans. See Note 6
seasoning and performance of the TDRs. See Note 5 Asset Purchased Impaired Loans in the Notes To Consolidated
Quality and Allowances for Loan and Lease Losses and Financial Statements in Item 8 of this Report for additional
Unfunded Loan Commitments and Letters of Credit in the information on net charge-offs related to these loans.
Notes To Consolidated Financial Statements in Item 8 of this
Report for additional information. We maintain an ALLL to absorb losses from the loan portfolio
and determine this allowance based on quarterly assessments
ALLOWANCES FOR LOAN AND LEASE LOSSES AND of the estimated probable credit losses incurred in the loan
UNFUNDED LOAN COMMITMENTS AND LETTERS OF portfolio. We maintain the ALLL at a level that we believe to
CREDIT be appropriate to absorb estimated probable credit losses
We recorded $1.6 billion in net charge-offs for the full year of incurred in the loan portfolio as of the balance sheet date.
2011, compared to $2.9 billion in the full year of 2010. While we make allocations to specific loans and pools of
Commercial lending net charge-offs fell from $1.6 billion in loans, the total reserve is available for all loan and lease
the full year of 2010 to $712 million in the full year of 2011. losses. Although quantitative modeling factors as discussed
Consumer lending net charge-offs declined from $1.3 billion below are constantly changing as the financial strength of the
in the full year of 2010 to $927 million in the full year of borrower and overall economic conditions change, there were
2011. no significant changes during the full year of 2011 to the
methodology we follow to determine our ALLL.

The PNC Financial Services Group, Inc. Form 10-K 81

We establish specific allowances for loans considered Recent macro economic factors,
impaired using methods prescribed by GAAP. All impaired Changes in risk selection and underwriting standards,
loans are subject to individual analysis, except leases and and
large groups of smaller-balance homogeneous loans which Timing of available information.
may include, but are not limited to, credit card, residential
mortgage, and consumer installment loans. Specific In addition to the ALLL, we maintain an allowance for
allowances for individual loans (including commercial and unfunded loan commitments and letters of credit. We report
consumer TDRs) are determined based on an analysis of the this allowance as a liability on our Consolidated Balance
present value of expected future cash flows from the loans Sheet. We maintain the allowance for unfunded loan
discounted at their effective interest rate, observable market commitments and letters of credit at a level we believe is
price, or the fair value of the underlying collateral. appropriate to absorb estimated probable losses on these
unfunded credit facilities. We determine this amount using
Allocations to non-impaired commercial loan classes are estimates of the probability of the ultimate funding and losses
based on PD and LGD credit risk ratings. related to those credit exposures. This methodology is very
similar to the one we use for determining our ALLL.
Our pool reserve methodology is sensitive to changes in key
risk parameters such as PDs, LGDs and EADs. In general, a We refer you to Note 5 Asset Quality and Allowances for
given change in any of the major risk parameters will have a Loan and Lease Losses and Unfunded Loan Commitments and
corresponding change in the pool reserve allocations for Letters of Credit in the Notes To Consolidated Financial
non-impaired commercial loans. Our commercial loans are the Statements in Item 8 of this Report for further information on
largest category of credits and are most sensitive to changes in key asset quality indicators that we use to evaluate our
the key risk parameters and pool reserve loss rates. To portfolio and establish the allowances.
illustrate, if we increase the pool reserve LGD by 5% for all
categories of non-impaired commercial loans, then the Allowance for Loan and Lease Losses
aggregate of the ALLL and allowance for unfunded loan
commitments and letters of credit would increase by $72 Dollars in millions 2011 2010
million. January 1 $ 4,887 $ 5,072
Total net charge-offs (1,639) (2,936)
The majority of the commercial portfolio is secured by
collateral, including loans to asset-based lending customers Provision for credit losses 1,152 2,502
that continue to show demonstrably lower loss given default. Adoption of ASU 2009-17, Consolidations 141
Further, the large investment grade or equivalent portion of Net change in allowance for unfunded loan
the loan portfolio has performed well and has not been subject commitments and letters of credit (52) 108
to significant deterioration. Additionally, guarantees on loans Other (1)
greater than $1 million and owner guarantees for small December 31 $ 4,347 $ 4,887
business loans do not significantly impact our ALLL.
Net charge-offs to average loans (for the
year ended) 1.08% 1.91%
Allocations to non-impaired consumer loan classes are based
Allowance for loan and lease losses to total
upon a roll-rate model which uses statistical relationships,
loans 2.73 3.25
calculated from historical data that estimate the movement of
loan outstandings through the various stages of delinquency Commercial lending net charge-offs $ (712) $(1,590)
and ultimately charge-off. Consumer lending net charge-offs (927) (1,346)
Total net charge-offs $(1,639) $(2,936)
The ALLL is lower than it would have been otherwise due to Net charge-offs to average loans (for the
the accounting treatment for purchased impaired loans. This year ended)
treatment also results in a lower ratio of ALLL to total loans. Commercial lending .86% 1.96%
Loan loss reserves on the purchased impaired loans were not
Consumer lending 1. 33 1.85
carried over on the date of acquisition. As of December 31,
2011, we have established reserves of $998 million for
purchased impaired loans. As further described in the Consolidated Income Statement
Review section of this Item 7, the provision for credit losses
A portion of the ALLL related to qualitative and measurement totaled $1.2 billion for the full year of 2011 compared to $2.5
factors has been assigned to loan categories. These factors billion for the full year of 2010. For the full year of 2011, the
include, but are not limited to, the following: provision for commercial lending credit losses declined by
Industry concentrations and conditions, $527 million or 75% from the full year of 2010. Similarly, the
Recent credit quality trends, provision for consumer lending credit losses decreased $823
Recent loss experience in particular portfolios, million or 46% from the full year of 2010.

82 The PNC Financial Services Group, Inc. Form 10-K

At December 31, 2011, total ALLL to total nonperforming
loans was 122%. The comparable amount for December 31,
2010 was 109%. The allowance allocated to consumer loans
and lines of credit not secured by residential real estate and
purchased impaired loans, which are both excluded from
nonperforming loans, totaled $1.4 billion at both
December 31, 2011, and 2010. See the Nonperforming Assets
By Type table within this Credit Risk Management section for
additional information. Excluding these balances, the
allowance as a percent of nonperforming loans was 84% and
77% as of December 31, 2011 and December 31, 2010,
respectively.
See Note 5 Asset Quality and Allowances for Loan and Lease
Losses and Unfunded Loan Commitments and Letters of
Credit and Note 6 Purchased Impaired Loans in the Notes To
Consolidated Financial Statements in Item 8 of this Report
regarding changes in the ALLL and in the allowance for
unfunded loan commitments and letters of credit.
CREDIT DEFAULT SWAPS
From a credit risk management perspective, we use credit
default swaps (CDS) as a tool to manage risk concentrations
in the credit portfolio. That risk management could come from
protection purchased or sold in the form of single name or
index products. When we buy loss protection by purchasing a
CDS, we pay a fee to the seller, or CDS counterparty, in return
for the right to receive a payment if a specified credit event
occurs for a particular obligor or reference entity.
When we sell protection, we receive a CDS premium from the
buyer in return for PNCs obligation to pay the buyer if a
specified credit event occurs for a particular obligor or
reference entity.
We evaluate the counterparty credit worthiness for all our
CDS activities. Counterparty credit lines are approved based
on a review of credit quality in accordance with our traditional
credit quality standards and credit policies. The credit risk of
our counterparties is monitored in the normal course of
business. In addition, all counterparty credit lines are subject
to collateral thresholds and exposures above these thresholds
are secured.
CDSs are included in the Derivatives not designated as
hedging instruments under GAAP table in the Financial
Derivatives section of this Risk Management discussion.
OPERATIONAL RISK MANAGEMENT
Operational risk is the risk of loss resulting from inadequate or
failed internal processes or systems, human factors, or
external events. This includes losses that may arise as a result
of non-compliance with laws or regulations, failure to fulfill
fiduciary responsibilities, as well as litigation or other legal
actions. Operational risk may occur in any of our business
activities and manifests itself in various ways, including but
not limited to:
Transaction processing errors,
Unauthorized transactions and fraud by employees or
third parties,
Material disruption in business activities,
System breaches and misuse of sensitive information,
Regulatory or governmental actions, fines or
penalties, and
Significant legal expenses, judgments or settlements.
Operational Risk Management focuses on balancing business
needs, regulatory expectations and risk management priorities
through a balanced, adaptive and proactive program that is
designed to provide a strong governance model, sound and
consistent management processes and transparent operational
risk reporting across the enterprise.
We manage operational risk based upon a comprehensive
framework that enables the company to determine the
enterprise and individual business units operational risk
profile in comparison to the established risk appetite and
identify operational risks that may require further mitigation.
This framework is established around a set of enterprise-wide
policies and a system of internal controls that are designed to
manage risk and to provide management with timely and
accurate information about the operations of PNC. This
framework employs a number of techniques to manage
operational risk, including:
Risk and Control Self-Assessments (RCSAs) are
performed at least annually across PNCs businesses,
processes, systems and products. RCSA methodology
is a standard process for management to self assess
operational risks, evaluate control effectiveness, and
determine if risk exposure is within established
tolerances;
Scenario Analysis is leveraged to proactively
evaluate operational loss events with the potential for
severe business, financial, operational or regulatory
impact on the company or a major business unit. This
methodology leverages standard processes and tools
to evaluate a wide range of business and operational
risks encompassing both external and internal events
relevant to the company. Based upon scenario
analysis conclusions, management may implement
additional controls or risk management activities to
reduce exposure to an acceptable level;
A Key Risk Indicator (KRI) framework allows
management to assess actual operational risk results
compared to expectations and thresholds, as well as
proactively identify unexpected shifts in operational
risk exposure or control effectiveness. Enterprise-
level KRIs are designed to monitor exposure across
the different inherent operational risk types.
Business-specific KRIs are established in support of
the individual risk and control self assessments; and
Operational loss events across the enterprise are
continuously captured and maintained in a central
repository. This information is analyzed and used to
help determine the root causes of these events and to
identify trends that could indicate changes in the
companys risk exposure or control effectiveness.
The PNC Financial Services Group, Inc. Form 10-K 83
 PNC utilizes a number of sources to identify external
loss events occurring across the financial services
industry. These events are evaluated to determine
whether PNC is exposed to similar events, and if so,
whether the appropriate controls are in place.
Operational Risk Management, Compliance and Legal
professionals work closely with business areas to evaluate
risks and help ensure the appropriate controls are established
prior to the introduction of new or enhanced products,
services, and technologies. These risk professionals also
consult with business areas in the design and implementation
of mitigation strategies to address risks and issues identified
through ongoing assessment and monitoring activities.
We are in the process of implementing a methodology to
estimate capital requirements for Operational Risk using a
proprietary version of an Advanced Measurement Approach
(AMA). Under the AMA approach, the results of the program
elements described above are key inputs directly incorporated
into the capital calculation methodology.
PNCs technology risk management and business resiliency
programs are aligned with the operational risk framework. Our
integrated security and technology risk management
framework is designed to help ensure a secure, sound, and
compliant infrastructure for information and system
management. The technology risk management process is
aligned with the strategic direction of the businesses and is
integrated into the technology management culture, structure
and practices.
Our business resiliency program manages the organizations
capabilities to provide services in the case of an event that
results in material disruption of business activities.
Prioritization of investments in people, processes, technology
and facilities is based on different types of events, business
risk and criticality. Detailed testing validates our resiliency
capabilities on an ongoing basis, and an integrated governance
model is designed to help assure appropriate management
reporting.
PNC uses insurance where appropriate to mitigate the effects
of operational risk events. PNC purchases direct coverage
provided by various insurers, and retains certain corporate
risks via one of its two wholly owned captive insurance
companies, Alpine Indemnity Limited. PNCs retention of
corporate risks associated with its participation as an insurer is
mitigated through policy limits. Insurance purchased in the
external market is governed by PNCs Financial Stability
Carrier guidelines.
As a component of PNCs risk management practices, we
purchase insurance designed to protect us against accidental
loss or losses, which, in the aggregate, may significantly affect
84 The PNC Financial Services Group, Inc. Form 10-K
personnel, property, financial objectives, or our ability to
continue to meet our responsibilities to our various
stakeholder groups.
On a quarterly basis, an enterprise operational risk report is
made reporting key operational risks to senior management
and the Board of Directors. The report encompasses key
operational risk management conclusions, including the
overall operational risk level, risk management effectiveness
and outlook, grounded in quantitative measures and
qualitative factors. Key enterprise operational risks are also
included in the enterprise risk report. In addition, operational
risk is an integrated part of the quarterly business-specific risk
reports.
MODEL RISK MANAGEMENT
PNC relies on quantitative models to measure risks and to
estimate certain financial values. Models may be used in such
processes as determining the pricing of various products,
grading and granting loans, measuring interest rate risks and
other market risks, predicting losses, and assessing capital
adequacy, as well as to estimate the value of financial
instruments and balance sheet items. There are risks involved
in the use of models as they have the potential to provide
inaccurate output or results, could be used for purposes other
than those for which they have been designed, or may be
operated in an uncontrolled environment where unauthorized
changes can take place and where other control risks exist.
Model Risk Management is responsible for policies and
procedures describing how model risk is evaluated and
managed, and the application of the governance process to
implement these practices throughout the enterprise.
To better manage our business, our practices around the use of
models, and to comply with regulatory guidance and
requirements, we have in place policies and procedures that
define our governance processes for assessing and controlling
model risk. These processes focus on identifying, reporting,
and remediating any problems with the soundness, accuracy,
improper use, or operating environment of our models. We
recognize that models must be monitored over time to ensure
their continued accuracy and functioning, and our policies also
address the type and frequency of monitoring that is
appropriate according to the importance of each model.
There are a number of practices we undertake to identify and
control model risk. A primary consideration is that models be
well understood by those who use them as well as by other
parties. Our policies require detailed written model
documentation for significant models to assist in making their
use transparent and understood by users, independent
reviewers, and regulatory and auditing bodies. The
documentation must include details on the data and methods
used to develop each model, assumptions utilized within the
model, and a description of model limitations and
circumstances in which a model should not be relied upon.
Our modeling methods and data are reviewed by independent
model reviewers not involved in the development of the model
to identify possible errors or areas where the soundness of the
model could be in question. Issues identified by the
independent reviewer are tracked and reported using our
existing governance structure until the issue has been fully
remediated. It is important that models operate in a controlled
environment where access to code or the ability to make
changes is limited to those so authorized. Additionally, proper
back-up and recovery mechanisms are needed for the ongoing
functioning of models. Our use of independent model control
reviewers aids in the evaluation of the existing control
mechanisms to help ensure that controls are appropriate and
are functioning properly.
LIQUIDITY RISK MANAGEMENT
Liquidity risk has two fundamental components. The first is
potential loss assuming we were unable to meet our funding
requirements at a reasonable cost. The second is the potential
inability to operate our businesses because adequate
contingent liquidity is not available in a stressed environment.
We manage liquidity risk at the consolidated company level
(bank, parent company, and nonbank subsidiaries combined)
to help ensure that we can obtain cost-effective funding to
meet current and future obligations under both normal
business as usual and stressful circumstances, and to help
ensure that we maintain an appropriate level of contingent
liquidity.
Spot and forward funding gap analyses are used to measure
and monitor consolidated liquidity risk. Funding gaps
represent the difference in projected sources of liquidity
available to offset projected uses. We calculate funding gaps
for the overnight, thirty-day, ninety-day, one hundred
eighty-day and one-year time intervals. Management also
monitors liquidity through a series of early warning indicators
that may indicate a potential market, or PNC-specific,
liquidity stress event. Finally, management performs a set of
liquidity stress tests and maintains a contingency funding plan
to address a potential liquidity crisis. In the most severe
liquidity stress simulation, we assume that PNCs liquidity
position is under pressure, while the market in general is under
systemic pressure. The simulation considers, among other
things, the impact of restricted access to both secured and
unsecured external sources of funding, accelerated run-off of
customer deposits, valuation pressure on assets, and heavy
demand to fund contingent obligations. Risk limits are
established within our Liquidity Risk Policy. Managements
Asset and Liability Committee regularly reviews compliance
with the established limits.
Parent company liquidity guidelines are designed to help
ensure that sufficient liquidity is available to meet our parent
company obligations over the succeeding 24-month period.
Risk limits for parent company liquidity are established within
our Enterprise Capital and Liquidity Management Policy. The
Board of Directors Risk Committee regularly reviews
compliance with the established limits.
Bank Level Liquidity Uses
Obligations requiring the use of liquidity can generally be
characterized as either contractual or discretionary. At the
bank level, primary contractual obligations include funding
loan commitments, satisfying deposit withdrawal requests and
maturities and debt service related to bank borrowings. We
also maintain adequate bank liquidity to meet future potential
loan demand and provide for other business needs, as
necessary. As of December 31, 2011, there were
approximately $7.3 billion of bank borrowings with
contractual maturities of less than one year.
Bank Level Liquidity Sources
Our largest source of bank liquidity on a consolidated basis is
the deposit base that comes from our retail and commercial
businesses. Liquid assets and unused borrowing capacity from
a number of sources are also available to maintain our
liquidity position. Borrowed funds come from a diverse mix
of short and long-term funding sources.
At December 31, 2011, our liquid assets consisted of short-
term investments (Federal funds sold, resale agreements,
trading securities, and interest-earning deposits with banks)
totaling $5.9 billion and securities available for sale totaling
$48.6 billion. Of our total liquid assets of $54.5 billion, we
had $20.1 billion pledged as collateral for borrowings, trust,
and other commitments. The level of liquid assets fluctuates
over time based on many factors, including market conditions,
loan and deposit growth and active balance sheet
management.
In addition to the customer deposit base, which has
historically provided the single largest source of relatively
stable and low-cost funding and liquid assets, the bank also
obtains liquidity through the issuance of traditional forms of
funding including long-term debt (senior notes and
subordinated debt and FHLB advances) and short-term
borrowings (Federal funds purchased, securities sold under
repurchase agreements, commercial paper issuances, and other
short-term borrowings).
PNC Bank, N.A. has the ability to offer up to $20 billion in
senior and subordinated unsecured debt obligations with
maturities of more than nine months. Through December 31,
2011, PNC Bank, N.A. had issued $6.9 billion of debt under
this program. Total senior and subordinated debt declined to
$4.1 billion at December 31, 2011 from $5.5 billion at
December 31, 2010 due to contractual maturities.
PNC Bank, N.A. is a member of the FHLB-Pittsburgh and as
such has access to advances from FHLB-Pittsburgh secured
generally by residential mortgage and other mortgage-related
loans. At December 31, 2011, our unused secured borrowing
capacity was $10.6 billion with FHLB-Pittsburgh. Total
The PNC Financial Services Group, Inc. Form 10-K 85
FHLB borrowings increased to $7.0 billion at December 31,
2011 from $6.0 billion at December 31, 2010 due to $2.0
billion in new borrowings partially offset by maturities.
PNC Bank, N.A. has the ability to offer up to $3.0 billion of
its commercial paper to provide additional liquidity. As of
December 31, 2011, there were no issuances outstanding
under this program. Other borrowed funds on our
Consolidated Balance Sheet includes $4.3 billion of
commercial paper issued by Market Street Funding LLC, a
consolidated VIE.
PNC Bank, N.A. can also borrow from the Federal Reserve
Bank of Clevelands (Federal Reserve Bank) discount window
to meet short-term liquidity requirements. The Federal
Reserve Bank, however, is not viewed as the primary means
of funding our routine business activities, but rather as a
potential source of liquidity in a stressed environment or
during a market disruption. These potential borrowings are
secured by securities and commercial loans. At December 31,
2011, our unused secured borrowing capacity was $26.9
billion with the Federal Reserve Bank.
Parent Company Liquidity Uses
Obligations requiring the use of liquidity can generally be
characterized as either contractual or discretionary. The parent
companys contractual obligations consist primarily of debt
service related to parent company borrowings and funding
non-bank affiliates. Additionally, the parent company
maintains adequate liquidity to fund discretionary activities
such as paying dividends to PNC shareholders, share
repurchases, and acquisitions. As of December 31, 2011, there
were approximately $4.0 billion of parent company
borrowings with contractual maturities of less than one year.
In addition, we will use approximately $3.5 billion of parent
company cash and short-term investments to acquire RBC
Bank (USA) in March 2012.
See Supervision and Regulation in Item 1 of this Report for
information regarding the Federal Reserves current
supervisory assessment of capital adequacy program (the 2012
CCAR), including its impact on our ability to take certain
capital actions, including plans to pay or increase common
stock dividends or to reinstate or increase common stock
repurchase programs.
See Capital and Liquidity Actions in the Executive Summary
section of this Item 7 for additional information regarding our
December 2011 announcement that the Federal Reserve
approved the acquisition of RBC Bank (USA) and that the
OCC approved the merger of RBC Bank (USA) with and into
PNC Bank, N.A. with these transactions scheduled to close
March 2012, our November 2011 redemption of trust
preferred securities, our September 2011 issuance of senior
notes, our July 2011 issuance of preferred stock, and our April
2011 increase to PNCs quarterly common stock dividend. We
did not repurchase any shares under PNCs existing common
stock repurchase program in 2011.
86 The PNC Financial Services Group, Inc. Form 10-K
Parent Company Liquidity Sources
The principal source of parent company liquidity is the
dividends it receives from its subsidiary bank, which may be
impacted by the following:
Bank-level capital needs,
Laws and regulations,
Corporate policies,
Contractual restrictions, and
Other factors.
The amount available for dividend payments by PNC Bank,
N.A. to the parent company without prior regulatory approval
was approximately $1.7 billion at December 31, 2011. There
are statutory and regulatory limitations on the ability of
national banks to pay dividends or make other capital
distributions or to extend credit to the parent company or its
non-bank subsidiaries. See Note 21 Regulatory Matters in the
Notes To Consolidated Financial Statements in Item 8 of this
Report for a further discussion of these limitations. Dividends
may also be impacted by the banks capital needs and by
contractual restrictions. We provide additional information on
certain contractual restrictions under the Trust Preferred
Securities section of the Off-Balance Sheet Arrangements
And Variable Interest Entities section of this Item 7 and in
Note 13 Capital Securities of Subsidiary Trusts and Perpetual
Trust Securities in the Notes To Consolidated Financial
Statements in Item 8 of this Report.
In addition to dividends from PNC Bank, N.A., other sources
of parent company liquidity include cash and short-term
investments, as well as dividends and loan repayments from
other subsidiaries and dividends or distributions from equity
investments. As of December 31, 2011, the parent company
had approximately $7.8 billion in funds available from its cash
and short-term investments.
We can also generate liquidity for the parent company and
PNCs non-bank subsidiaries through the issuance of debt
securities and equity securities, including certain capital
securities, in public or private markets and commercial paper.
We have effective shelf registration statements pursuant to
which we can issue additional debt and equity securities,
including certain hybrid capital instruments. Total senior and
subordinated debt and hybrid capital instruments declined to
$16.0 billion at December 31, 2011 from $17.3 billion at
December 31, 2010 due to maturities.
During 2011 we issued the following securities under our
shelf registration statement:
$1.25 billion of senior notes issued September 19,
2011 and due September 2016. Interest is paid semi-
annually at a fixed rate of 2.70%,
One million depositary shares, each representing a
1/100th interest in a share of our Fixed-to-Floating
Rate Non-Cumulative Perpetual Preferred Stock,
Series O, issued July 27, 2011, resulting in gross
proceeds to us before commissions and expenses of
$1 billion.
The parent company, through its subsidiary PNC Funding quality of earnings, and the current legislative and regulatory
Corp, has the ability to offer up to $3.0 billion of commercial environment, including implied government support. In
paper to provide additional liquidity. As of December 31, addition, rating agencies themselves have been subject to
2011, there were no issuances outstanding under this program. scrutiny arising from the financial crisis and could make or be
required to make substantial changes to their ratings policies
Note 18 Equity in the Notes To Consolidated Financial and practices, particularly in response to legislative and
Statements in Item 8 of this Report describes our February regulatory changes, including as a result of provisions in
2010 redemption of all 75,792 shares of our Fixed Rate Dodd-Frank. Potential changes in the legislative and
Cumulative Perpetual Preferred Shares, Series N (Series N regulatory environment and the timing of those changes could
Preferred Stock) that had been issued on December 31, 2008 impact our ratings, which as noted above, could impact our
to the US Treasury under the TARP Capital Purchase liquidity and financial condition. A decrease, or potential
Program, the acceleration of the accretion of the remaining decrease, in credit ratings could impact access to the capital
issuance discount on the Series N Preferred Stock in the first markets and/or increase the cost of debt, and thereby
quarter of 2010 (and a corresponding reduction in retained adversely affect liquidity and financial condition.
earnings of $250 million in the first quarter of 2010), and the
exchange by the US Treasury of the TARP warrant issued to it Credit ratings as of December 31, 2011 for PNC and PNC
on December 31, 2008 into warrants, each to purchase one Bank, N.A. follow:
share of PNC common stock at an exercise price of $67.33,
Standard
sold by the US Treasury in a secondary public offering in May &
Moodys Poors Fitch
2010. These common stock warrants will expire December 31,
2018. The PNC Financial
Services Group, Inc.
Status of Credit Ratings Senior debt A3 A- A+
The cost and availability of short-term and long-term funding, Subordinated debt Baa1 BBB+ A
as well as collateral requirements for certain derivative Preferred stock Baa3 BBB A-
instruments, is influenced by PNCs debt ratings.
PNC Bank, N.A.
Subordinated debt A3 A- A
In general, rating agencies base their ratings on many
Long-term deposits A2 A AA-
quantitative and qualitative factors, including capital
adequacy, liquidity, asset quality, business mix, level and Short-term deposits P-1 A-1 F1+

Commitments
The following tables set forth contractual obligations and various other commitments as of December 31, 2011 representing
required and potential cash outflows.

Contractual Obligations Payment Due By Period

Four to
Less than One to three five After five
December 31, 2011 in millions Total one year years years years
Remaining contractual maturities of time deposits (a) $31,632 $25,021 $ 4,146 $1,267 $ 1,198
Borrowed funds (a) (b) 36,704 15,794 6,088 4,679 10,143
Minimum annual rentals on noncancellable leases 2,489 342 586 409 1,152
Nonqualified pension and postretirement benefits 558 64 122 116 256
Purchase obligations (c) 616 343 202 55 16
Total contractual cash obligations $71,999 $41,564 $11,144 $6,526 $12,765
(a) Includes purchase accounting adjustments.
(b) Includes basis adjustment relating to accounting hedges.
(c) Includes purchase obligations for goods and services covered by noncancellable contracts and contracts including cancellation fees.

At December 31, 2011, unrecognized tax benefits totaled $209 million. This liability for unrecognized tax benefits represents an
estimate of tax positions that we have taken in our tax returns which ultimately may not be sustained upon examination by taxing
authorities. Since the ultimate amount and timing of any future cash settlements cannot be predicted with reasonable certainty, this
estimated liability has been excluded from the contractual obligations table. See Note 20 Income Taxes in the Notes To
Consolidated Financial Statements in Item 8 of this Report for additional information.

The PNC Financial Services Group, Inc. Form 10-K 87

Our contractual obligations totaled $84.6 billion at December 31, 2010. The decline in the comparison is primarily attributable to
decreases in the remaining contractual maturities of time deposits and borrowed funds.

Other Commitments (a) Amount Of Commitment Expiration By Period

Total After
Amounts Less than One to three Four to five
December 31, 2011 in millions Committed one year years five years years
Net unfunded credit commitments $103,271 $48,011 $31,491 $23,167 $ 602
Standby letters of credit (b) 10,769 4,537 5,004 1,107 121
Reinsurance agreements (c) 6,432 2,959 105 50 3,318
Other commitments (d) 707 367 251 85 4
Total commitments $121,179 $55,874 $36,851 $24,409 $4,045
(a) Other commitments are funding commitments that could potentially require performance in the event of demands by third parties or contingent events. Loan commitments are reported
net of syndications, assignments and participations.
(b) Includes $7.4 billion of standby letters of credit that support remarketing programs for customers variable rate demand notes.
(c) Reinsurance agreements are with third-party insurers related to insurance sold to our customers.
(d) Includes unfunded commitments related to private equity investments of $247 million and other investments of $3 million that are not on our Consolidated Balance Sheet. Also
includes commitments related to tax credit investments of $420 million and other direct equity investments of $37 million that are included in Other liabilities on our Consolidated
Balance Sheet.

MARKET RISK MANAGEMENT OVERVIEW Sensitivity results and market interest rate benchmarks for the
Market risk is the risk of a loss in earnings or economic value fourth quarters of 2011 and 2010 follow:
due to adverse movements in market factors such as interest
rates, credit spreads, foreign exchange rates, and equity prices.
Interest Sensitivity Analysis
We are exposed to market risk primarily by our involvement
in the following activities, among others:
Traditional banking activities of taking deposits and Fourth Fourth
Quarter Quarter
extending loans, 2011 2010
Equity and other investments and activities whose Net Interest Income Sensitivity Simulation
economic values are directly impacted by market Effect on net interest income in first year
factors, and from gradual interest rate change over
Trading in fixed income products, equities, following 12 months of:
derivatives, and foreign exchange, as a result of 100 basis point increase 2.3% 1.4%
customer activities and underwriting. 100 basis point decrease (a) (1.5)% (1.4)%
Effect on net interest income in second year
We have established enterprise-wide policies and from gradual interest rate change over the
methodologies to identify, measure, monitor, and report preceding 12 months of:
market risk. Market Risk Management provides independent 100 basis point increase 7.1% 4.1%
oversight by monitoring compliance with these limits and 100 basis point decrease (a) (4.4)% (4.8)%
guidelines, and reporting significant risks in the business to Duration of Equity Model (a)
the Risk Committee of the Board. Base case duration of equity (in years): (6.2) (.5)
Key Period-End Interest Rates
MARKET RISK MANAGEMENT INTEREST RATE RISK
One-month LIBOR .30% .26%
Interest rate risk results primarily from our traditional banking
activities of gathering deposits and extending loans. Many Three-year swap .82% 1.28%
factors, including economic and financial conditions, (a) Given the inherent limitations in certain of these measurement tools and techniques,
results become less meaningful as interest rates approach zero.
movements in interest rates, and consumer preferences, affect
the difference between the interest that we earn on assets and
the interest that we pay on liabilities and the level of our In addition to measuring the effect on net interest income
noninterest-bearing funding sources. Due to the repricing term assuming parallel changes in current interest rates, we
mismatches and embedded options inherent in certain of these routinely simulate the effects of a number of nonparallel
products, changes in market interest rates not only affect interest rate environments. The following Net Interest Income
expected near-term earnings, but also the economic values of Sensitivity to Alternative Rate Scenarios table reflects the
these assets and liabilities. percentage change in net interest income over the next two
12-month periods assuming (i) the PNC Economists most
Asset and Liability Management centrally manages interest likely rate forecast, (ii) implied market forward rates, and
rate risk set forth in our risk management policies approved by (iii) a Two-Ten Slope decrease (a 200 basis point decrease
managements Asset and Liability Committee and the Risk between two-year and ten-year rates superimposed on current
Committee of the Board. base rates) scenario.

88 The PNC Financial Services Group, Inc. Form 10-K

Net Interest Income Sensitivity to Alternative Rate Scenarios
(Fourth Quarter 2011)
PNC
Economist
Market
Forward
First year sensitivity .9%
Second year sensitivity 4.1%
All changes in forecasted net interest income are relative to
results in a base rate scenario where current market rates are
assumed to remain unchanged over the forecast horizon.
When forecasting net interest income, we make assumptions
about interest rates and the shape of the yield curve, the
volume and characteristics of new business, and the behavior
of existing on- and off-balance sheet positions. These
assumptions determine the future level of simulated net
interest income in the base interest rate scenario and the other
interest rate scenarios presented in the above table. These
simulations assume that as assets and liabilities mature, they
are replaced or repriced at then current market rates. We also
consider forward projections of purchase accounting accretion
when forecasting net interest income.
The following graph presents the yield curves for the base rate
scenario and each of the alternate scenarios one year forward.
Alternate Interest Rate Scenarios
One Year Forward
3.0
2.0
1.0
We use value-at-risk (VaR) as the primary means to measure
and monitor market risk in trading activities. We calculate
VaR at both a 99% non diversified and 95% diversified
Two-Ten
Slope
confidence interval. The 99% VaR is used for computing our
regulatory market risk capital charge while 95% VaR is used
.8% .4%
for internal management reporting. PNC began measuring
3.1% .9% enterprise wide VaR internally on a diversified basis at a 95%
confidence interval in the second quarter of 2011. We believe
a diversified VaR is a better representation of risk as it reflects
empirical correlations across different asset classes.
Additionally, moving to a 95% confidence level provides a
more stable measure of the VaR for day-to-day risk
management. During 2011, our 95% VaR ranged between $.4
million and $3.5 million, averaging $.8 million.
During 2011, our 99% non-diversified VaR ranged between
$1.0 million and $6.8 million, averaging $1.8 million. During
2010, our VaR ranged between $2.3 million and $8.8 million,
averaging $5.4 million.
To help ensure the integrity of the models used to calculate
VaR for each portfolio and enterprise-wide, we use a process
known as backtesting. The backtesting process consists of
comparing actual observations of trading-related gains or
losses against the VaR levels that were calculated at the close
of the prior day. Over a typical business cycle, we would
expect an average of twelve to thirteen instances a year in
which actual losses exceeded the prior day VaR measure at the
enterprise-wide level at a 95% confidence interval. There were
no such instances during the year ended December 31, 2011
under our diversified VaR measure. We use a 500 day look
back period for backtesting and include customer related
revenue. Including customer revenue helps to reduce trading
losses and therefore, there were no instances of actual losses
exceeding the prior day VaR measure.

The following graph shows a comparison of enterprise-wide

0.0 trading-related gains and losses against prior day diversified
1M LIBOR 2Y Swap 3Y Swap 5Y Swap 10Y Swap VaR for the period.
Base Rates PNC Economist Market Forward Two-Ten Slope decrease
Enterprise-Wide Trading-Related
Gains/Losses Versus Value at Risk
The fourth quarter 2011 interest sensitivity analyses indicate 90
that our Consolidated Balance Sheet is positioned to benefit 75
from an increase in interest rates and an upward sloping 60
P&L
45
interest rate yield curve. We believe that we have the deposit
Millions

30
funding base and balance sheet flexibility to adjust, where 15
appropriate and permissible, to changing interest rates and 0
market conditions. (15)
(30) VaR

MARKET RISK MANAGEMENT TRADING RISK (45)

12/31/10

1/31/11

2/28/11

3/31/11

4/30/11

5/31/11

6/30/11

7/31/11

8/31/11

9/30/11

10/31/11

11/30/11

12/30/11

Our trading activities are primarily customer-driven trading in

fixed income securities, derivatives, and foreign exchange
contracts. They also include the underwriting of fixed income
and equity securities.

The PNC Financial Services Group, Inc. Form 10-K 89

Total trading revenue was as follows:
Trading Revenue
Year ended December 31
In millions 2011 2010 2009
Net interest income $ 43 $ 55 $ 61
Noninterest income 225 183
Total trading revenue $268 $238 $231
Securities underwriting and trading (a) $ 81 $ 94 $ 75
Foreign exchange 88 76
Financial derivatives and other 99 68
Total trading revenue $268 $238 $231
(a) Includes changes in fair value for certain loans accounted for at fair value.
The trading revenue disclosed above includes results from
providing investing and risk management services to our
customers as well as results from hedges of customer activity.
Trading revenue excludes the impact of economic hedging
activities which we transact to manage risk primarily related
to residential mortgage servicing rights, residential and
commercial mortgage loans held-for-sale, and certain
residential mortgage-backed agency securities with embedded
derivatives. Derivatives used for economic hedges are not
designated as accounting hedges because the contracts they
are hedging are typically also carried at fair value on the
balance sheet, resulting in symmetrical accounting treatment
for both the hedging instrument and the hedged item.
Economic hedge results are reported in noninterest income
along with the associated hedge items.
Trading revenue for 2011 increased $30 million compared
with 2010 primarily due to higher derivatives and foreign
exchange client sales revenues, improved client related trading
results, and the reduced impact of counterparty credit risk on
valuations of derivative positions. These increases were
partially offset by lower underwriting activity.
Trading revenue increased $7 million in 2010 compared with
2009 primarily due to higher underwriting and derivatives
client sales revenue, partially offset by reduced proprietary
and customer related trading results. Proprietary trading
positions were essentially eliminated by the end of the second
quarter of 2010.
MARKET RISK MANAGEMENT EQUITY AND OTHER
INVESTMENT RISK
Equity investment risk is the risk of potential losses associated
with investing in both private and public equity markets. PNC
invests primarily in private equity markets. In addition to
extending credit, taking deposits, and underwriting and trading
financial instruments, we make and manage direct investments
in a variety of transactions, including management buyouts,
recapitalizations, and growth financings in a variety of
industries. We also have investments in affiliated and
non-affiliated funds that make similar investments in private
equity and in debt and equity-oriented hedge funds. The
90 The PNC Financial Services Group, Inc. Form 10-K
economic and/or book value of these investments and other
assets such as loan servicing rights are directly affected by
changes in market factors.
The primary risk measurement for equity and other
investments is economic capital. Economic capital is a
common measure of risk for credit, market and operational
170
risk. It is an estimate of the potential value depreciation over a
one year horizon commensurate with solvency expectations of
an institution rated single-A by the credit rating agencies.
73 Given the illiquid nature of many of these types of
83 investments, it can be a challenge to determine their fair
values. See Note 8 Fair Value in the Notes To Consolidated
Financial Statements in Item 8 of this Report for additional
information.
Various PNC business units manage our equity and other
investment activities. Our businesses are responsible for
making investment decisions within the approved policy limits
and associated guidelines.
A summary of our equity investments follows:
Dec. 31 Dec. 31
In millions 2011 2010
BlackRock $ 5,291 $5,017
Tax credit investments 2,646 2,054
Private equity 1,491 1,375
Visa 456 456
Other 250 318
Total $10,134 $ 9,220
BlackRock
PNC owned approximately 36 million common stock
equivalent shares of BlackRock equity at December 31, 2011,
accounted for under the equity method. The primary risk
measurement, similar to other equity investments, is economic
capital. The Business Segments Review section of this Item 7
includes additional information about BlackRock.
Tax Credit Investments
Included in our equity investments are tax credit investments
which are accounted for under the equity method. These
investments, as well as equity investments held by
consolidated partnerships, totaled $2.6 billion at December 31,
2011 and $2.1 billion at December 31, 2010.
Private Equity
The private equity portfolio is an illiquid portfolio comprised
of mezzanine and equity investments that vary by industry,
stage and type of investment.
Private equity investments carried at estimated fair value
totaled $1.5 billion at December 31, 2011 and $1.4 billion at
December 31, 2010. As of December 31, 2011, $856 million
was invested directly in a variety of companies and $635
million was invested indirectly through various private equity
funds. Included in direct investments are investment activities
of two private equity funds that are consolidated for financial
reporting purposes. The noncontrolling interests of these funds
totaled $241 million as of December 31, 2011. The indirect
private equity funds are not redeemable, but PNC receives
distributions over the life of the partnership from liquidation
of the underlying investments by the investee.
Our unfunded commitments related to private equity totaled
$247 million at December 31, 2011 compared with $319
million at December 31, 2010.
Visa
At December 31, 2011, our investment in Visa Class B
common shares totaled approximately 23 million shares. In
March 2011, Visa funded $400 million to their litigation
escrow account and reduced the conversion ratio of Visa B to
A shares. We consequently recognized our estimated $38
million share of the $400 million as a reduction of our
previously established indemnification liability and a
reduction of noninterest expense. In December 2011, Visa
funded $1.6 billion to their litigation escrow account and
reduced the conversion ratio of Visa B to A shares. We
consequently recognized $32 million as a reduction of our
previously established indemnification liability and a
reduction of noninterest expense. As of December 31, 2011,
our recognized Visa indemnification liability was zero. As we
continue to have an obligation to indemnify Visa for
judgments and settlements for the remaining specified
litigation, we may have additional exposure in the future to the
specified Visa litigation.
As of December 31, 2011, we had recognized $456 million of
our Visa ownership. Based on the December 31, 2011 closing
price of $101.53 for the Visa Class A shares, the market value
of our total investment was approximately $1.0 billion at the
current conversion ratio which considers all litigation funding
by Visa to date. The Visa Class B common shares we own
generally will not be transferable, except under limited
circumstances, until they can be converted into shares of the
publicly traded class of stock, which cannot happen until the
settlement of all of the specified litigation. It is expected that
Visa will continue to adjust the conversion ratio of Visa Class
B to Class A shares in connection with any settlements in
excess of any amounts then in escrow for that purpose and
will also reduce the conversion ratio to the extent that it adds
any funds to the escrow in the future.
Note 23 Commitments and Guarantees in the Notes To
Consolidated Financial Statements in Item 8 of this Report has
further information on our Visa indemnification obligation.
Other Investments
We also make investments in affiliated and non-affiliated
funds with both traditional and alternative investment
strategies. The economic values could be driven by either the
fixed-income market or the equity markets, or both. At
December 31, 2011, other investments totaled $250 million
compared with $318 million at December 31, 2010. We
recognized net gains related to these investments of $1 million
during 2011, compared with $43 million during 2010.
Given the nature of these investments, if market conditions
affecting their valuation were to worsen, we could incur future
losses.
Our unfunded commitments related to other investments
totaled $3 million at December 31, 2011 and $11 million at
December 31, 2010.
IMPACT OF INFLATION
Our assets and liabilities are primarily financial in nature and
typically have varying maturity dates. Accordingly, future
changes in prices do not affect the obligations to pay or
receive fixed and determinable amounts of money. However,
during periods of inflation, there may be a subsequent impact
affecting certain fixed costs or expenses, an erosion of
consumer and customer purchasing power, and fluctuations in
the needs or demand for our products and services. Should
significant levels of inflation occur, our business could
potentially be impacted by, among other things, reducing our
tolerance for extending credit or causing us to incur additional
credit losses resulting from possible increased default rates.
FINANCIAL DERIVATIVES
We use a variety of financial derivatives as part of the overall
asset and liability risk management process to help manage
interest rate, market and credit risk inherent in our business
activities. Substantially all such instruments are used to
manage risk related to changes in interest rates. Interest rate
and total return swaps, interest rate caps and floors, swaptions,
options, forwards and futures contracts are the primary
instruments we use for interest rate risk management. We also
enter into derivatives with customers to facilitate their risk
management activities.
Financial derivatives involve, to varying degrees, interest rate,
market and credit risk. For interest rate swaps and total return
swaps, options and futures contracts, only periodic cash
payments and, with respect to options, premiums are
exchanged. Therefore, cash requirements and exposure to
credit risk are significantly less than the notional amount on
these instruments.
Further information on our financial derivatives is presented
in Note 1 Accounting Policies and Note 16 Financial
Derivatives in the Notes To Consolidated Financial
Statements in Item 8 of this Report, which is incorporated here
by reference.
Not all elements of interest rate, market and credit risk are
addressed through the use of financial or other derivatives,
and such instruments may be ineffective for their intended
purposes due to unanticipated market changes, among other
reasons.
The PNC Financial Services Group, Inc. Form 10-K 91
The following table provides the notional or contractual amounts and estimated net fair value of financial derivatives at
December 31, 2011 and December 31, 2010.

Financial Derivatives December 31, 2011 December 31, 2010

Notional/ Estimated Notional/ Estimated
Contractual Net Fair Contractual Net Fair
In millions Amount Value Amount Value
Derivatives designated as hedging instruments under GAAP
Interest rate contracts (a)
Asset rate conversion
Receive fixed swaps $ 13,902 $ 529 $ 14,452 $ 332
Pay fixed swaps (c) (d) 1,797 (116) 1,669 12
Liability rate conversion
Receive fixed swaps 10,476 1,316 9,803 834
Forward purchase commitments 2,733 43 2,350 (8)
Total interest rate risk management 28,908 1,772 28,274 1,170
Foreign exchange contracts
FX forward 326
Total derivatives designated as hedging instruments (b) $ 29,234 $1,772 $ 28,274 $1,170
Derivatives not designated as hedging instruments under GAAP
Derivatives used for residential mortgage banking activities:
Interest rate contracts
Swaps $ 98,406 $ 454 $ 83,421 $ 63
Futures 64,250 51,699
Future options 8,000 31,250 21
Bond options 1,250 3
Swaptions 10,312 49 11,040 28
Commitments related to residential mortgage assets 14,773 59 16,652 47
Total residential mortgage banking activities $196,991 $ 565 $194,062 $ 159
Derivatives used for commercial mortgage banking activities:
Interest rate contracts
Swaps $ 1,180 $ (34) $ 1,744 $ (41)
Swaptions 450 3
Commitments related to commercial mortgage assets 995 5 1,228 5
Credit contracts
Credit default swaps 95 5 210 8
Total commercial mortgage banking activities $ 2,720 $ (21) $ 3,182 $ (28)
Derivatives used for customer-related activities:
Interest rate contracts
Swaps (d) $122,088 $ (214) $ 92,248 $ (104)
Caps/floors
Sold 5,861 (6) 3,207 (15)
Purchased 5,601 19 2,528 14
Swaptions 1,713 63 2,165 13
Futures 6,982 2,793
Commitments related to residential mortgage assets (d) 487 (1) 738
Foreign exchange contracts 11,920 9 7,913 (6)
Equity contracts 184 (3) 334 (3)
Credit contracts
Risk participation agreements 3,259 1 2,738 3
Total customer-related $158,095 $ (132) $114,664 $ (98)
Derivatives used for other risk management activities:
Interest rate contracts
Swaps (d) $ 1,704 $ (34) $ 3,021 $ 6
Swaptions 225 1 100 4
Futures 1,740 298
Commitments related to residential mortgage assets 1,100 1
Foreign exchange contracts 25 (4) 32 (4)
Credit contracts
Credit default swaps 209 6 551 8
Other contracts (e) 386 (296) 209 (396)
Total other risk management $ 4,289 $ (327) $ 5,311 $ (381)
Total derivatives not designated as hedging instruments $362,095 $ 85 $317,219 $ (348)
Total Gross Derivatives $391,329 $1,857 $345,493 $ 822

92 The PNC Financial Services Group, Inc. Form 10-K

(a) The floating rate portion of interest rate contracts is based on money-market indices. As a percent of notional amount, 57% were based on 1-month LIBOR and 43% on 3-month
LIBOR at December 31, 2011 compared with 58% and 42%, respectively, at December 31, 2010.
(b) Fair value amount includes net accrued interest receivable of $140 million at December 31, 2011 and $132 million at December 31, 2010.
(c) Includes zero-coupon swaps.
(d) The increases in the negative fair values from December 31, 2010 to December 31, 2011 for interest rate contracts, foreign exchange, equity contracts and other contracts were due to
the changes in fair values of the existing contracts along with new contracts entered into during 2011 and contracts terminated during that period.
(e) Includes PNCs obligation to fund a portion of certain BlackRock LTIP programs and other contracts.
2010 VERSUS 2009
CONSOLIDATED INCOME STATEMENT REVIEW
Summary Results
Net income for 2010 was $3.4 billion, or $5.74 per diluted
common share and for 2009 was $2.4 billion or $4.36 per
diluted common share. For 2010, net income attributable to
common shareholders and diluted earnings per common share
were impacted by a noncash reduction of $250 million related
to our redemption of TARP preferred stock.
Net Interest Income
Net interest income was $9.2 billion for 2010 up 2% from
2009, while the net interest margin rose to 4.14% in 2010
compared with 3.82% for 2009.
Noninterest Income
Summary
Noninterest income was $5.9 billion for 2010 and $7.1 billion
for 2009. The primary driver of this change was a reduction of
$916 million for BlackRock related transactions. During
fourth quarter 2010, we realized a pretax gain of $160 million
on 7.5 million BlackRock common shares sold by PNC as a
part of a BlackRock secondary common stock offering.
During fourth quarter 2009, we recognized a $1.1 billion
pretax gain related to BlackRocks acquisition of Barclays
Global Investors (BGI).
Asset management revenue was $1.1 billion in 2010 compared
with $858 million in 2009. This increase reflected higher
equity earnings from our BlackRock investment, improved
equity markets and client growth. Discretionary assets under
management at December 31, 2010 totaled $108 billion
compared with $103 billion at December 31, 2009.
Consumer services fees totaled $1.3 billion in both 2010 and
2009. Consumer service fees for 2010 reflected higher
volume-related transaction fees offset by lower brokerage fees
and the impact of the January 1, 2010 consolidation of the
securitized credit card portfolio.
Corporate services revenue totaled $1.1 billion in 2010 and
$1.0 billion in 2009. The increase was largely the result of
higher merger and acquisition advisory and ancillary
commercial mortgage servicing fees partially offset by a
reduction in the value of commercial mortgage servicing
rights largely driven by lower interest rates. Corporate
services fees include the noninterest component of treasury
management fees, which continued to be a strong contributor
to revenue.
Residential mortgage revenue totaled $699 million in 2010
compared with $990 million in 2009. The decline in 2010
reflected reduced loan sales revenue following the strong loan
origination refinance volume in 2009 and lower net hedging
gains on mortgage servicing rights.
There were lower service charges on deposits of $245 million
in 2010 compared with 2009, partially resulting from the
negative impact of the new Regulation E rules.
Net securities gains increased by $128 million in 2010
compared with 2009 due to lower net credit related OTTI
partially offset by lower gains on sales of securities.
Gains on BlackRock related transactions included a fourth
quarter 2010 pretax gain of $160 million from our sale of
7.5 million BlackRock common shares as part of a BlackRock
secondary common stock offering. During the fourth quarter
of 2009, we recognized a $1.1 billion pretax gain on PNCs
portion of the increase in BlackRocks equity resulting from
the value of BlackRock shares issued by BlackRock in
connection with its acquisition of BGI.
Other noninterest income totaled $884 million for 2010
compared with $987 million for 2009. Other noninterest
income for 2009 included gains of $103 million primarily
related to our BlackRock LTIP shares obligation. Other
noninterest income for 2010 included net gains on alternative
investments, including private equity, of $258 million,
compared with net losses on alternative investments, including
private equity, of $93 million in 2009. Gains on sales of loans
were $73 million in 2010 and $220 million in 2009.
Provision For Credit Losses
The provision for credit losses totaled $2.5 billion for 2010
compared with $3.9 billion for 2009. The lower provision in
2010 reflected credit exposure reductions and overall
improved credit migration during 2010.
Noninterest Expense
Noninterest expense for 2010 declined 5%, to $8.6 billion,
compared with $9.1 billion for 2009. The impact of higher
cost savings related to the National City acquisition
integration and the reversal of certain accrued liabilities in
2010, including $73 million associated with a franchise tax
settlement and $123 million associated with an
indemnification liability for certain Visa litigation, were
reflected in the lower 2010 expenses. Lower expenses in the
comparison also reflected a special FDIC assessment,
intended to build the FDICs Deposit Insurance Fund, of $133
million in 2009. We also continued to invest in customer
growth and innovation initiatives.
The PNC Financial Services Group, Inc. Form 10-K 93
National City integration costs included in noninterest expense
totaled $387 million in 2010 and $421 million in 2009. We
achieved National City acquisition cost savings of $1.8 billion
on an annualized basis in the fourth quarter of 2010 through
the reduction of operational and administrative redundancies.
This amount was higher than our original goal of $1.2 billion,
and ahead of schedule. During 2010, we completed the
customer and branch conversions to our technology platforms
and integrated the businesses and operations of National City
with those of PNC.
Effective Tax Rate
Our effective tax rate was 25.5% for 2010 and 26.9% for
2009.
CONSOLIDATED BALANCE SHEET REVIEW
Loans
Loans decreased $6.9 billion, or 4%, to $150.6 billion as of
December 31, 2010 compared with December 31, 2009. An
increase in loans of $3.5 billion from the initial consolidation
of Market Street and the securitized credit card portfolio
effective January 1, 2010 was more than offset by the impact
of soft customer loan demand combined with loan repayments
and payoffs in the portfolio.
Loans represented 57% of total assets at December 31, 2010
and 58% at December 31, 2009. Commercial lending
represented 53% of the loan portfolio and consumer lending
represented 47% at both December 31, 2010 and
December 31, 2009. Commercial real estate loans represented
7% of total assets at December 31, 2010 and 9% of total assets
at December 31, 2009.
Investment Securities
The carrying amount of investment securities totaled $64.3
billion at December 31, 2010, an increase of $8.3 billion, or
15%, from $56.0 billion at December 31, 2009. The increase
in investment securities primarily reflected an increase in
securities available for sale as excess liquidity was invested in
short duration, high quality securities. Investment securities
represented 24% of total assets at December 31, 2010 and
21% at December 31, 2009.
In March 2010, we transferred $2.2 billion of available for
sale commercial mortgage-backed non-agency securities to
the held to maturity portfolio. The transfer involved high
quality securities where managements intent to hold changed.
At December 31, 2010, the securities available for sale
portfolio included a net unrealized loss of $861 million, which
represented the difference between fair value and amortized
cost. The comparable amount at December 31, 2009 was a net
unrealized loss of $2.3 billion. The expected weighted-average
life of investment securities (excluding corporate stocks and
other) was 4.7 years at December 31, 2010 and 4.1 years at
December 31, 2009.
94 The PNC Financial Services Group, Inc. Form 10-K
Loans Held For Sale
Loans held for sale totaled $3.5 billion at December 31, 2010
compared with $2.5 billion at December 31, 2009. We stopped
originating certain commercial mortgage loans designated as
held for sale during the first quarter of 2008 and continue
pursuing opportunities to reduce these positions at appropriate
prices. We sold $241 million of commercial mortgage loans
held for sale carried at fair value in 2010 and sold $272
million in 2009.
Residential mortgage loan origination volume was $10.5
billion in 2010. Substantially all such loans were originated
under agency or Federal Housing Administration (FHA)
standards. We sold $10.0 billion of loans and recognized
related gains of $231 million during 2010. The comparable
amounts for 2009 were $19.8 billion and $435 million,
respectively.
Asset Quality
Nonperforming assets decreased $1.1 billion to $5.1 billion at
December 31, 2010 compared with $6.2 billion at
December 31, 2009. Nonperforming loans decreased $1.2
billion to $4.5 billion since December 31, 2009 while OREO
and foreclosed assets increased $124 million to $657 million.
The decrease in nonperforming loans was primarily due to
improvements in our commercial lending and residential real
estate portfolios, partially offset by increases in our consumer
home equity portfolio. These consumer home equity
nonperforming loan increases were largely due to increases in
troubled debt restructurings (TDRs).
At December 31, 2010, our largest nonperforming asset was
$35 million in the Accommodation and Food Services
Industry and our average nonperforming loan associated with
commercial lending was approximately $1 million.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets totaled $10.8 billion at
December 31, 2010 compared with $12.9 billion at December,
31, 2009. Goodwill declined $1.4 billion, to $8.1 billion, at
December 31, 2010 compared with the December 31, 2009
balance primarily due to the sale of GIS which reduced
goodwill by $1.2 billion. The $.8 billion decline in other
intangible assets from December 31, 2009 included $.3 billion
declines in both commercial and residential mortgage
servicing rights due primarily to the sale of commercial
mortgage servicing rights and residential mortgage servicing
rights value changes resulting primarily from market-driven
changes in interest rates.
Funding Sources
Total funding sources were $222.9 billion at December 31,
2010 and $226.2 billion at December 31, 2009. Funding
sources decreased $3.3 billion, primarily driven by declines in
retail certificates of deposit and Federal Home Loan Bank
borrowings, partially offset by increases in demand deposits
and other borrowings.
Total deposits decreased $3.5 billion at December 31, 2010
compared with December 31, 2009. Deposits decreased in the
comparison primarily due to declines in retail certificates of
deposit, time deposits in foreign offices and money market
deposits, partially offset by an increase in demand deposits.
Total borrowed funds increased $.2 billion to $39.5 billion at
December 31, 2010 compared to December 31, 2009. Other
borrowed funds increased in the comparison primarily due to
the consolidation of Market Street and a credit card
securitization trust. Additionally, bank notes and senior debt
increased since December 31, 2009 due to net issuances.
These increases were partially offset in the comparison by a
decline of Federal Home Loan Bank borrowings.
PNC issued $3.25 billion of senior notes in 2010. In March
2009, PNC issued $1.0 billion of floating rate senior notes
guaranteed by the FDIC under the FDICs TLGP-Debt
Guarantee Program (TLGP). In addition, PNC issued
$1.5 billion of senior notes during the second and third
quarters of 2009 that were not issued under the TLGP.
Shareholders Equity
Total shareholders equity increased $.3 billion, to $30.2
billion, at December 31, 2010 compared with December 31,
2009 and included the impact of the following:
The first quarter 2010 issuance of 63.9 million shares
of common stock in an underwritten offering at $54
per share resulted in a $3.4 billion increase in total
shareholders equity,
An increase of $2.7 billion to retained earnings, and
A $1.5 billion decline in accumulated other
comprehensive loss largely due to decreases in net
unrealized securities losses.
The factors above were mostly offset by a decline of $7.3
billion in capital surplus-preferred stock in connection with
our February 2010 redemption of the Series N (TARP)
Preferred Stock as explained further in Note 18 Equity in the
Notes To Consolidated Financial Statements in Item 8 of this
Report.
Regulatory capital ratios at December 31, 2010 were 10.2%
for leverage, 12.1% for Tier 1 risk-based and 15.6% for total
risk-based capital. At December 31, 2009, the regulatory
capital ratios were 10.1% for leverage, 11.4% for Tier 1 risk-
based and 15.0% for total risk-based capital. The increase in
Tier 1 risk-based capital was attributable to retention of
earnings in 2010, the first quarter 2010 equity offering, the
third quarter 2010 sale of GIS, and lower risk-weighted assets.
GLOSSARY OF TERMS
Accretable net interest (Accretable yield) The excess of cash
flows expected to be collected on a purchased impaired loan
over the carrying value of the loan. The accretable net interest
is recognized into interest income over the remaining life of
the loan using the constant effective yield method.
Adjusted average total assets Primarily comprised of total
average quarterly (or annual) assets plus (less) unrealized
losses (gains) on investment securities, less goodwill and
certain other intangible assets (net of eligible deferred taxes).
Annualized Adjusted to reflect a full year of activity.
Assets under management Assets over which we have sole
or shared investment authority for our customers/clients. We
do not include these assets on our Consolidated Balance Sheet.
Basis point One hundredth of a percentage point.
Carrying value of purchased impaired loans The net value
on the balance sheet which represents the recorded investment
less any valuation allowance.
Cash recoveries Cash recoveries used in the context of
purchased impaired loans represent cash payments from
customers that exceeded the recorded investment of the
designated impaired loan.
Charge-off Process of removing a loan or portion of a loan
from our balance sheet because it is considered uncollectible.
We also record a charge-off when a loan is transferred from
portfolio holdings to held for sale by reducing the loan
carrying amount to the fair value of the loan, if fair value is
less than carrying amount.
Combined Loan-to-value ratio (CLTV) This is the aggregate
principal balance(s) of the mortgages on a property divided by
its appraised value or purchase price.
Commercial mortgage banking activities Includes
commercial mortgage servicing, originating commercial
mortgages for sale and related hedging activities. Commercial
mortgage banking activities revenue includes commercial
mortgage servicing (including net interest income and
noninterest income from loan servicing and ancillary services,
net of commercial mortgage servicing rights amortization, and
commercial mortgage servicing rights valuations), and
revenue derived from commercial mortgage loans intended for
sale and related hedges (including loan origination fees, net
interest income, valuation adjustments and gains or losses on
sales).
Common shareholders equity to total assets Common
shareholders equity divided by total assets. Common
shareholders equity equals total shareholders equity less the
liquidation value of preferred stock.
Core net interest income Total net interest income less
purchase accounting accretion.
Credit derivatives Contractual agreements, primarily credit
default swaps, that provide protection against a credit event of
one or more referenced credits. The nature of a credit event is
The PNC Financial Services Group, Inc. Form 10-K 95
established by the protection buyer and protection seller at the
inception of a transaction, and such events include
bankruptcy, insolvency and failure to meet payment
obligations when due. The buyer of the credit derivative pays
a periodic fee in return for a payment by the protection seller
upon the occurrence, if any, of a credit event.
Credit spread The difference in yield between debt issues of
similar maturity. The excess of yield attributable to credit
spread is often used as a measure of relative creditworthiness,
with a reduction in the credit spread reflecting an
improvement in the borrowers perceived creditworthiness.
Derivatives Financial contracts whose value is derived from
changes in publicly traded securities, interest rates, currency
exchange rates or market indices. Derivatives cover a wide
assortment of financial contracts, including but not limited to
forward contracts, futures, options and swaps.
Duration of equity An estimate of the rate sensitivity of our
economic value of equity. A negative duration of equity is
associated with asset sensitivity (i.e., positioned for rising
interest rates), while a positive value implies liability
sensitivity (i.e., positioned for declining interest rates). For
example, if the duration of equity is +1.5 years, the economic
value of equity declines by 1.5% for each 100 basis point
increase in interest rates.
Earning assets Assets that generate income, which include:
Federal funds sold; resale agreements; trading securities;
interest-earning deposits with banks; loans held for sale;
loans; investment securities; and certain other assets.
Economic capital Represents the amount of resources that a
business or business segment should hold to guard against
potentially large losses that could cause insolvency and is
based on a measurement of economic risk. The economic
capital measurement process involves converting a risk
distribution to the capital that is required to support the risk,
consistent with our target credit rating. As such, economic risk
serves as a common currency of risk that allows us to
compare different risks on a similar basis.
Effective duration A measurement, expressed in years, that,
when multiplied by a change in interest rates, would
approximate the percentage change in value of on- and off-
balance sheet positions.
Efficiency Noninterest expense divided by total revenue.
Fair value The price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
FICO score A credit bureau-based industry standard score
created by Fair Isaac Co. which predicts the likelihood of
borrower default. We use FICO scores both in underwriting
and assessing credit risk in our consumer lending portfolio.
96 The PNC Financial Services Group, Inc. Form 10-K
Lower FICO scores indicate likely higher risk of default,
while higher FICO scores indicate likely lower risk of default.
FICO scores are updated on a periodic basis.
Foreign exchange contracts Contracts that provide for the
future receipt and delivery of foreign currency at previously
agreed-upon terms.
Funds transfer pricing A management accounting
methodology designed to recognize the net interest income
effects of sources and uses of funds provided by the assets and
liabilities of a business segment. We assign these balances
LIBOR-based funding rates at origination that represent the
interest cost for us to raise/invest funds with similar maturity
and repricing structures.
Futures and forward contracts Contracts in which the buyer
agrees to purchase and the seller agrees to deliver a specific
financial instrument at a predetermined price or yield. May be
settled either in cash or by delivery of the underlying financial
instrument.
GAAP Accounting principles generally accepted in the
United States of America.
Home Price Index (HPI) A broad measure of the movement
of single-family house prices in the U.S.
Interest rate floors and caps Interest rate protection
instruments that involve payment from the protection seller to
the protection buyer of an interest differential, which
represents the difference between a short-term rate (e.g., three-
month LIBOR) and an agreed-upon rate (the strike rate)
applied to a notional principal amount.
Interest rate swap contracts Contracts that are entered into
primarily as an asset/liability management strategy to reduce
interest rate risk. Interest rate swap contracts are exchanges of
interest rate payments, such as fixed-rate payments for
floating-rate payments, based on notional principal amounts.
Intrinsic value The difference between the price, if any,
required to be paid for stock issued pursuant to an equity
compensation arrangement and the fair market value of the
underlying stock.
Investment securities Collectively, securities available for
sale and securities held to maturity.
Leverage ratio Tier 1 risk-based capital divided by adjusted
average total assets.
LIBOR Acronym for London InterBank Offered Rate.
LIBOR is the average interest rate charged when banks in the
London wholesale money market (or interbank market)
borrow unsecured funds from each other. LIBOR rates are
used as a benchmark for interest rates on a global basis.
PNCs product set includes loans priced using LIBOR as a
benchmark.
Loan-to-value ratio (LTV) A calculation of a loans
collateral coverage that is used both in underwriting and
assessing credit risk in our lending portfolio. LTV is the sum
total of loan obligations secured by collateral divided by the
market value of that same collateral. Market values of the
collateral are based on an independent valuation of the
collateral. For example, an LTV of less than 90% is better
secured and has less credit risk than an LTV of greater than or
equal to 90%.
Loss Given Default (LGD) An estimate of recovery based
on collateral type, collateral value, loan exposure, or the
guarantor(s) quality and guaranty type (full or partial). Each
loan has its own LGD. The LGD risk rating measures the
percentage of exposure of a specific credit obligation that we
expect to lose if default occurs. LGD is net of recovery,
through either liquidation of collateral or deficiency
judgments rendered from foreclosure or bankruptcy
proceedings.
Net interest margin Annualized taxable-equivalent net
interest income divided by average earning assets.
Nonaccretable difference Contractually required payments
receivable on a purchased impaired loan in excess of the cash
flows expected to be collected.
Nondiscretionary assets under administration Assets we hold
for our customers/clients in a non-discretionary, custodial
capacity. We do not include these assets on our Consolidated
Balance Sheet.
Nonperforming assets Nonperforming assets include
non-accrual loans, certain non-accrual troubled debt
restructured loans, OREO, foreclosed and other assets. We do
not accrue interest income on assets classified as
nonperforming.
Nonperforming loans Loans for which we do not accrue
interest income. Nonperforming loans include loans to
commercial, commercial real estate, equipment lease
financing, consumer (including loans and lines of credit
secured by residential real estate), and residential real estate
(including mortgages and construction) customers as well as
certain non-accrual troubled debt restructured loans.
Nonperforming loans do not include loans held for sale or
OREO and foreclosed assets. Nonperforming loans do not
include purchased impaired loans as we are currently
accreting interest income over the expected life of the loans.
Notional amount A number of currency units, shares, or
other units specified in a derivative contract.
Operating leverage The period to period dollar or percentage
change in total revenue (GAAP basis) less the dollar or
percentage change in noninterest expense. A positive variance
indicates that revenue growth exceeded expense growth (i.e.,
positive operating leverage) while a negative variance implies
expense growth exceeded revenue growth (i.e., negative
operating leverage).
Options Contracts that grant the purchaser, for a premium
payment, the right, but not the obligation, to either purchase or
sell the associated financial instrument at a set price during a
specified period or at a specified date in the future.
Other real estate owned (OREO) and foreclosed assets
Assets taken in settlement of troubled loans through surrender
or foreclosure. Foreclosed assets include all assets received in
full or partial satisfaction of a loan and include real and
personal property, equity interests in corporations,
partnerships, joint ventures, and beneficial interests in trusts.
Premises that are no longer used in operations may also be
included in other real estate owned.
Other-than-temporary impairment (OTTI) When the fair
value of a security is less than its amortized cost basis, an
assessment is performed to determine whether the impairment
is other-than-temporary. If we intend to sell the security or
more likely than not will be required to sell the security before
recovery of its amortized cost basis less any current-period
credit loss, an other-than-temporary impairment is considered
to have occurred. In such cases, an other-than-temporary
impairment is recognized in earnings equal to the entire
difference between the investments amortized cost basis and
its fair value at the balance sheet date. Further, if we do not
expect to recover the entire amortized cost of the security, an
other-than-temporary impairment is considered to have
occurred. However for debt securities, if we do not intend to
sell the security and it is not more likely than not that we will
be required to sell the security before its recovery, the other-
than-temporary loss is separated into (a) the amount
representing the credit loss, and (b) the amount related to all
other factors. The other-than-temporary impairment related to
credit losses is recognized in earnings while the amount
related to all other factors is recognized in other
comprehensive income, net of tax.
Parent company liquidity coverage Liquid assets divided by
funding obligations within a two year period.
Pretax earnings Income from continuing operations before
income taxes and noncontrolling interests.
Pretax, pre-provision earnings from continuing operations
Total revenue less noninterest expense, both from continuing
operations.
Primary client relationship A corporate banking client
relationship with annual revenue generation of $10,000 to
$50,000 or more, and for Asset Management Group, a client
relationship with annual revenue generation of $10,000 or
more.
Probability of Default (PD) An internal risk rating that
indicates the likelihood that a credit obligor will enter into
default status.
The PNC Financial Services Group, Inc. Form 10-K 97
Purchase accounting accretion Accretion of the discounts
and premiums on acquired assets and liabilities. The purchase
accounting accretion is recognized in net interest income over
the weighted-average life of the financial instruments using
the constant effective yield method. Accretion for Purchased
impaired loans includes any cash recoveries received in excess
of the recorded investment.
Purchased impaired loans Acquired loans determined to be
credit impaired under FASB ASC 310-30 (AICPA SOP 03-3).
Loans are determined to be impaired if there is evidence of
credit deterioration since origination and for which it is
probable that all contractually required payments will not be
collected.
Recorded investment The initial investment of a purchased
impaired loan plus interest accretion and less any cash
payments and writedowns to date. The recorded investment
excludes any valuation allowance which is included in our
allowance for loan and lease losses.
Recovery Cash proceeds received on a loan that we had
previously charged off. We credit the amount received to the
allowance for loan and lease losses.
Residential development loans Project-specific loans to
commercial customers for the construction or development of
residential real estate including land, single family homes,
condominiums and other residential properties. This would
exclude loans to commercial customers where proceeds are
for general corporate purposes whether or not such facilities
are secured.
Residential mortgage servicing rights hedge gains/(losses),
net We have elected to measure acquired or originated
residential mortgage servicing rights (MSRs) at fair value
under GAAP. We employ a risk management strategy
designed to protect the economic value of MSRs from changes
in interest rates. This strategy utilizes securities and a portfolio
of derivative instruments to hedge changes in the fair value of
MSRs arising from changes in interest rates. These financial
instruments are expected to have changes in fair value which
are negatively correlated to the change in fair value of the
MSR portfolio. Net MSR hedge gains/(losses) represent the
change in the fair value of MSRs, exclusive of changes due to
time decay and payoffs, combined with the change in the fair
value of the associated securities and derivative instruments.
Return on average assets Annualized net income divided by
average assets.
Return on average capital Annualized net income divided by
average capital.
Return on average common shareholders equity Annualized
net income less preferred stock dividends, including preferred
stock discount accretion and redemptions, divided by average
common shareholders equity.
98 The PNC Financial Services Group, Inc. Form 10-K
Risk-weighted assets Computed by the assignment of
specific risk-weights (as defined by the Board of Governors of
the Federal Reserve System) to assets and off-balance sheet
instruments.
Securitization The process of legally transforming financial
assets into securities.
Servicing rights An intangible asset or liability created by an
obligation to service assets for others. Typical servicing rights
include the right to receive a fee for collecting and forwarding
payments on loans and related taxes and insurance premiums
held in escrow.
Swaptions Contracts that grant the purchaser, for a premium
payment, the right, but not the obligation, to enter into an
interest rate swap agreement during a specified period or at a
specified date in the future.
Taxable-equivalent interest The interest income earned on
certain assets is completely or partially exempt from Federal
income tax. As such, these tax-exempt instruments typically
yield lower returns than taxable investments. To provide more
meaningful comparisons of yields and margins for all interest-
earning assets, we use interest income on a taxable-equivalent
basis in calculating average yields and net interest margins by
increasing the interest income earned on tax-exempt assets to
make it fully equivalent to interest income earned on other
taxable investments. This adjustment is not permitted under
GAAP on the Consolidated Income Statement.
Tier 1 common capital Tier 1 risk-based capital, less
preferred equity, less trust preferred capital securities, and less
noncontrolling interests.
Tier 1 common capital ratio Tier 1 common capital divided
by period-end risk-weighted assets.
Tier 1 risk-based capital Total shareholders equity, plus
trust preferred capital securities, plus certain noncontrolling
interests that are held by others; less goodwill and certain
other intangible assets (net of eligible deferred taxes relating
to taxable and nontaxable combinations), less equity
investments in nonfinancial companies less ineligible
servicing assets and less net unrealized holding losses on
available for sale equity securities. Net unrealized holding
gains on available for sale equity securities, net unrealized
holding gains (losses) on available for sale debt securities and
net unrealized holding gains (losses) on cash flow hedge
derivatives are excluded from total shareholders equity for
Tier 1 risk-based capital purposes.
Tier 1 risk-based capital ratio Tier 1 risk-based capital
divided by period-end risk-weighted assets.
Total equity Total shareholders equity plus noncontrolling
interests.
Total return swap A non-traditional swap where one party
agrees to pay the other the total return of a defined
underlying asset (e.g., a loan), usually in return for receiving a
stream of LIBOR-based cash flows. The total returns of the
asset, including interest and any default shortfall, are passed
through to the counterparty. The counterparty is therefore
assuming the credit and economic risk of the underlying asset.
Total risk-based capital Tier 1 risk-based capital plus
qualifying subordinated debt and trust preferred securities,
other noncontrolling interest not qualified as Tier 1, eligible
gains on available for sale equity securities and the allowance
for loan and lease losses, subject to certain limitations.
Total risk-based capital ratio Total risk-based capital divided
by period-end risk-weighted assets.
Transaction deposits The sum of interest-bearing money
market deposits, interest-bearing demand deposits, and
noninterest-bearing deposits.
Troubled debt restructuring (TDR) A loan whose terms have
been restructured in a manner that grants a concession to a
borrower experiencing financial difficulties.
Value-at-risk (VaR) A statistically-based measure of risk
that describes the amount of potential loss which may be
incurred due to severe and adverse market movements. The
measure is of the maximum loss which should not be
exceeded on 95 out of 100 days for a 95% VaR and 99 out of
100 days for a 99% VaR.
Watchlist A list of criticized loans, credit exposure or other
assets compiled for internal monitoring purposes. We define
criticized exposure for this purpose as exposure with an
internal risk rating of other assets especially mentioned,
substandard, doubtful or loss.
Yield curve A graph showing the relationship between the
yields on financial instruments or market indices of the same
credit quality with different maturities. For example, a
normal or positive yield curve exists when long-term
bonds have higher yields than short-term bonds. A flat yield
curve exists when yields are the same for short-term and long-
term bonds. A steep yield curve exists when yields on long-
term bonds are significantly higher than on short-term bonds.
An inverted or negative yield curve exists when short-
term bonds have higher yields than long-term bonds.
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING
INFORMATION
We make statements in this Report, and may from time to
time make other statements, regarding our outlook for
earnings, revenues, expenses, capital levels and ratios,
liquidity levels, asset levels, asset quality and other matters
regarding or affecting PNC and its future business and
operations that are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act.
Forward-looking statements are typically identified by words
such as believe, plan, expect, anticipate, see,
look, intend, outlook, project, forecast, estimate,
goal, will, should and other similar words and
expressions. Forward-looking statements are subject to
numerous assumptions, risks and uncertainties, which change
over time.
Forward-looking statements speak only as of the date made.
We do not assume any duty and do not undertake to update
forward-looking statements. Actual results or future events
could differ, possibly materially, from those anticipated in
forward-looking statements, as well as from historical
performance.
Our forward-looking statements are subject to the following
principal risks and uncertainties.
Our businesses, financial results and balance sheet values
are affected by business and economic conditions,
including the following:
Changes in interest rates and valuations in debt,
equity and other financial markets.
Disruptions in the liquidity and other functioning of
U.S. and global financial markets.
The impact on financial markets and the economy of
the downgrade by Standard & Poors of U.S.
Treasury obligations and other U.S. government-
backed debt, as well as issues surrounding the level
of U.S. and European government debt and concerns
regarding the creditworthiness of certain sovereign
governments in Europe.
Actions by Federal Reserve, U.S. Treasury and other
government agencies, including those that impact
money supply and market interest rates.
Changes in customers, suppliers and other
counterparties performance and creditworthiness.
Slowing or failure of the current moderate economic
recovery.
Continued effects of aftermath of recessionary
conditions and uneven spread of positive impacts of
recovery on the economy and our counterparties,
including adverse impacts on levels of
unemployment, loan utilization rates, delinquencies,
defaults and counterparty ability to meet credit and
other obligations.
The PNC Financial Services Group, Inc. Form 10-K 99
 Changes in customer preferences and behavior,
whether due to changing business and economic
conditions, legislative and regulatory initiatives, or
other factors.
Our forward-looking financial statements are subject to
the risk that economic and financial market conditions
will be substantially different than we are currently
expecting. These statements are based on our current
view that the modest economic expansion will persist in
2012 and interest rates will remain very low.
Legal and regulatory developments could have an impact
on our ability to operate our businesses, financial
condition, results of operations, competitive position,
reputation, or pursuit of attractive acquisition
opportunities. Reputational impacts could affect matters
such as business generation and retention, liquidity,
funding, and ability to attract and retain management.
These developments could include:
Changes resulting from legislative and regulatory
reforms, including broad-based restructuring of
financial industry regulation and changes to laws and
regulations involving tax, pension, bankruptcy,
consumer protection, and other industry aspects, and
changes in accounting policies and principles. We
will be impacted by extensive reforms provided for in
the Dodd-Frank Wall Street Reform and Consumer
Protection Act and otherwise growing out of the
recent financial crisis, the precise nature, extent and
timing of which, and their impact on us, remains
uncertain.
Changes to regulations governing bank capital and
liquidity standards, including due to the Dodd-Frank
Act and to Basel III initiatives.
Unfavorable resolution of legal proceedings or other
claims and regulatory and other governmental
investigations or other inquiries. In addition to
matters relating to PNCs business and activities,
such matters may include proceedings, claims,
investigations, or inquiries relating to pre-acquisition
business and activities of acquired companies, such
as National City. These matters may result in
monetary judgments or settlements or other remedies,
including fines, penalties, restitution or alterations in
our business practices, and in additional expenses and
collateral costs, and may cause reputational harm to
PNC.
Results of the regulatory examination and
supervision process, including our failure to satisfy
requirements of agreements with governmental
agencies.
Impact on business and operating results of any costs
associated with obtaining rights in intellectual
property claimed by others and of adequacy of our
intellectual property protection in general.
Business and operating results are affected by our ability
to identify and effectively manage risks inherent in our
businesses, including, where appropriate, through
100 The PNC Financial Services Group, Inc. Form 10-K
effective use of third-party insurance, derivatives, and
capital management techniques, and to meet evolving
regulatory capital standards. In particular, our results
currently depend on our ability to manage elevated levels
of impaired assets.
Business and operating results also include impacts
relating to our equity interest in BlackRock, Inc. and rely
to a significant extent on information provided to us by
BlackRock. Risks and uncertainties that could affect
BlackRock are discussed in more detail by BlackRock in
its SEC filings.
Our planned acquisition of RBC Bank (USA) presents us
with risks and uncertainties related both to the acquisition
transaction itself and its integration into PNC after
closing, including:
The transaction (including integration of RBC Bank
(USA)s businesses) may be substantially more
expensive to complete than anticipated. Anticipated
benefits, including cost savings and strategic gains,
may be significantly harder or take longer to achieve
than expected or may not be achieved in their entirety
as a result of unexpected factors or events.
Our ability to achieve anticipated results from this
transaction is dependent also on the extent of credit
losses in the acquired loan portfolios and the extent
of deposit attrition, in part related to the state of
economic and financial markets. Also, litigation and
governmental investigations that may be filed or
commenced, as a result of this transaction or
otherwise, could impact the timing or realization of
anticipated benefits to PNC.
Integration of RBC Bank (USA)s business and
operations into PNC, which will include conversion
of RBC Bank (USA)s different systems and
procedures, may take longer than anticipated or be
more costly than anticipated or have unanticipated
adverse results relating to RBC Bank (USA)s or
PNCs existing businesses. PNCs ability to integrate
RBC Bank (USA) successfully may be adversely
affected by the facts that this transaction will result in
PNC entering several markets where PNC does not
currently have any meaningful retail presence and
that the conversion is taking place simultaneously
with the acquisition.
In addition to the planned RBC Bank (USA) transaction,
we grow our business in part by acquiring from time to
time other financial services companies, financial services
assets and related deposits and other liabilities. These other
acquisitions often present risks and uncertainties analogous
to those presented by the RBC Bank (USA) transaction.
Acquisition risks include those presented by the nature of
the business acquired as well as risks and uncertainties
related to the acquisition transactions themselves,
regulatory issues, and the integration of the acquired
businesses into PNC after closing.
Competition can have an impact on customer acquisition,
growth and retention and on credit spreads and product
 pricing, which can affect market share, deposits and
revenues. Industry restructuring in the current
environment could also impact our business and financial
performance through changes in counterparty
creditworthiness and performance and in the competitive
and regulatory landscape. Our ability to anticipate and
respond to technological changes can also impact our
ability to respond to customer needs and meet
competitive demands.
Business and operating results can also be affected by
widespread disasters, dislocations, terrorist activities or
international hostilities through impacts on the economy
and financial markets generally or on us or our
counterparties specifically.
We provide greater detail regarding some of these factors
elsewhere in this Report, including in the Risk Factors and
Risk Management sections. Our forward-looking statements
may also be subject to other risks and uncertainties, including
those discussed elsewhere in this Report or in our other filings
with the SEC.
ITEM 7A QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
This information is set forth in the Risk Management section
of Item 7 of this Report.
ITEM 8 FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Shareholders of The PNC
Financial Services Group, Inc.
In our opinion, the accompanying consolidated balance sheets
and the related consolidated statements of income, changes in
equity, and cash flows present fairly, in all material respects,
the financial position of The PNC Financial Services Group,
Inc. and its subsidiaries (the Company) at December 31,
2011 and December 31, 2010, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2011 in conformity with
accounting principles generally accepted in the United States
of America. Also in our opinion, the Company maintained, in
all material respects, effective internal control over financial
reporting as of December 31, 2011, based on criteria
established in Internal ControlIntegrated Framework issued
by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Companys management
is responsible for these financial statements, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in Managements Report on
Internal Control over Financial Reporting appearing under
Item 9A. Our responsibility is to express opinions on these
financial statements and on the Companys internal control
over financial reporting based on our integrated audits. We
conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether
effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
February 29, 2012
The PNC Financial Services Group, Inc. Form 10-K 101
CONSOLIDATED INCOME STATEMENT
THE PNC FINANCIAL SERVICES GROUP, INC.
Year ended December 31
In millions, except per share data 2011 2010 2009
Interest Income
Loans $ 7,595 $ 8,276 $ 8,919
Investment securities 2,161 2,389 2,688
Other 438 485 479
Total interest income 10,194 11,150 12,086
Interest Expense
Deposits 668 963 1,741
Borrowed funds 826 957 1,262
Total interest expense 1,494 1,920 3,003
Net interest income 8,700 9,230 9,083
Noninterest Income
Asset management 1,088 1,054 858
Consumer services 1,243 1,261 1,290
Corporate services 898 1,082 1,021
Residential mortgage 713 699 990
Service charges on deposits 534 705 950
Net gains on sales of securities 249 426 550
Other-than-temporary impairments (420) (608) (1,935)
Less: Noncredit portion of other-than-temporary impairments (a) (268) (283) (1,358)
Net other-than-temporary impairments (152) (325) (577)
Gains on BlackRock transactions 160 1,076
Other 1,053 884 987
Total noninterest income 5,626 5,946 7,145
Total revenue 14,326 15,176 16,228
Provision For Credit Losses 1,152 2,502 3,930
Noninterest Expense
Personnel 3,966 3,906 4,119
Occupancy 738 730 713
Equipment 661 668 695
Marketing 249 266 233
Other 3,491 3,043 3,313
Total noninterest expense 9,105 8,613 9,073
Income from continuing operations before income taxes and noncontrolling interests 4,069 4,061 3,225
Income taxes 998 1,037 867
Income from continuing operations before noncontrolling interests 3,071 3,024 2,358
Income from discontinued operations (net of income taxes of zero, $338, and $54) 373 45
Net income 3,071 3,397 2,403
Less: Net income (loss) attributable to noncontrolling interests 15 (15) (44)
Preferred stock dividends 56 146 388
Preferred stock discount accretion and redemptions 2 255 56
Net income attributable to common shareholders $ 2,998 $ 3,011 $ 2,003
Earnings Per Common Share
From continuing operations
Basic $ 5.70 $ 5.08 $ 4.30
Diluted $ 5.64 $ 5.02 $ 4.26
From net income
Basic $ 5.70 $ 5.80 $ 4.40
Diluted $ 5.64 $ 5.74 $ 4.36
Average Common Shares Outstanding
Basic 524 517 454
Diluted 526 520 455
(a) Included in accumulated other comprehensive income (loss).
See accompanying Notes To Consolidated Financial Statements.

102 The PNC Financial Services Group, Inc. Form 10-K

CONSOLIDATED BALANCE SHEET
THE PNC FINANCIAL SERVICES GROUP, INC.
December 31 December 31
In millions, except par value 2011 2010
Assets
Cash and due from banks (includes $7 and $2 for VIEs) (a) $ 4,105 $ 3,297
Federal funds sold and resale agreements (includes $732 and $866 measured at fair value) (b) 2,205 3,704
Trading securities 2,513 1,826
Interest-earning deposits with banks (includes $325 and $288 for VIEs) (a) 1,169 1,610
Loans held for sale (includes $2,365 and $2,755 measured at fair value) (b) 2,936 3,492
Investment securities (includes $109 and $192 for VIEs) (a) 60,634 64,262
Loans (includes $6,096 and $4,645 for VIEs) (includes $227 and $116 measured at fair value) (a) (b) 159,014 150,595
Allowance for loan and lease losses (includes $(91) and $(183) for VIEs) (a) (4,347) (4,887)
Net loans 154,667 145,708
Goodwill 8,285 8,149
Other intangible assets 1,859 2,604
Equity investments (includes $1,643 and $1,177 for VIEs) (a) 10,134 9,220
Other (includes $1,205 and $676 for VIEs) (includes $210 and $396 measured at fair value) (a) (b) 22,698 20,412
Total assets $271,205 $264,284
Liabilities
Deposits
Noninterest-bearing $ 59,048 $ 50,019
Interest-bearing 128,918 133,371
Total deposits 187,966 183,390
Borrowed funds
Federal funds purchased and repurchase agreements 2,984 4,144
Federal Home Loan Bank borrowings 6,967 6,043
Bank notes and senior debt 11,793 12,904
Subordinated debt 8,321 9,842
Other (includes $4,777 and $3,354 for VIEs) (a) 6,639 6,555
Total borrowed funds 36,704 39,488
Allowance for unfunded loan commitments and letters of credit 240 188
Accrued expenses (includes $155 and $88 for VIEs) (a) 4,175 3,188
Other (includes $734 and $456 for VIEs) (a) 4,874 5,192
Total liabilities 233,959 231,446
Equity
Preferred stock (c)
Common stock ($5 par value, authorized 800 shares, issued 537 and 536 shares) 2,683 2,682
Capital surplus preferred stock 1,637 647
Capital surplus common stock and other 12,072 12,057
Retained earnings 18,253 15,859
Accumulated other comprehensive income (loss) (105) (431)
Common stock held in treasury at cost: 10 shares (487) (572)
Total shareholders equity 34,053 30,242
Noncontrolling interests 3,193 2,596
Total equity 37,246 32,838
Total liabilities and equity $271,205 $264,284
(a) Amounts represent the assets or liabilities of consolidated variable interest entities (VIEs).
(b) Amounts represent items for which the Corporation has elected the fair value option.
(c) Par value less than $.5 million at each date.
See accompanying Notes To Consolidated Financial Statements.

The PNC Financial Services Group, Inc. Form 10-K 103

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
THE PNC FINANCIAL SERVICES GROUP, INC.
Shareholders Equity
Capital
Shares Capital Surplus - Accumulated
Outstanding Surplus - Common Other
Common Common Preferred Stock and Retained Comprehensive Treasury Noncontrolling Total
In millions Stock Stock Stock Other Earnings Income (Loss) Stock Interests Equity
Balance at December 31, 2008 (a) 443 $2,261 $7,918 $ 8,328 $11,461 $(3,949) $(597) $2,226 $27,648
Cumulative effect of adopting FASB ASC 320-10 (b) 110 (110)
Balance at January 1, 2009 443 $2,261 $7,918 $ 8,328 $11,571 $(4,059) $(597) $2,226 $27,648
Net income (loss) 2,447 (44) 2,403
Other comprehensive income (loss), net of tax
Net unrealized losses on other-than-temporary impaired
debt securities (706) (706)
Net unrealized securities gains 2,866 2,866
Net unrealized losses on cash flow hedge derivatives (208) (208)
Pension, other postretirement and postemployment benefit
plan adjustments 125 125
Other 20 20
Comprehensive income (loss) (44) 4,500
Cash dividends declared
Common (430) (430)
Preferred (388) (388)
Preferred stock discount accretion 56 (56)
Supervisory Capital Assessment Program issuance 15 75 549 624
Common stock activity 4 18 147 165
Treasury stock activity (c) (158) 84 (74)
Other 79 443 522
Balance at December 31, 2009 (a) 462 $2,354 $7,974 $ 8,945 $13,144 $(1,962) $(513) $2,625 $32,567
Cumulative effect of adopting ASU 2009-17 (92) (13) (105)
Balance at January 1, 2010 462 $2,354 $7,974 $ 8,945 $13,052 $(1,975) $(513) $2,625 $32,462
Net income 3,412 (15) 3,397
Other comprehensive income (loss), net of tax
Net unrealized gains on other-than-temporary impaired
debt securities 170 170
Net unrealized securities gains 868 868
Net unrealized gains on cash flow hedge derivatives 356 356
Pension, other postretirement and postemployment benefit
plan adjustments 162 162
Other (12) (12)
Comprehensive income (loss) (15) 4,941
Cash dividends declared
Common (204) (204)
Preferred (146) (146)
Redemption of preferred stock and noncontrolling interest
Series N (TARP) (7,579) (7,579)
Preferred stock discount accretion 252 (252)
Other (1) (3) (4)
Common stock activity (d) 65 328 3,113 3,441
Treasury stock activity (1) (62) (59) (121)
Other 62 (14) 48
Balance at December 31, 2010 (a) 526 $2,682 $ 647 $12,057 $15,859 $ (431) $(572) $2,596 $32,838

(continued on following page)

104 The PNC Financial Services Group, Inc. Form 10-K

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
THE PNC FINANCIAL SERVICES GROUP, INC.
(continued from previous page)

Shareholders Equity
Capital
Shares Capital Surplus - Accumulated
Outstanding Surplus - Common Other
Common Common Preferred Stock and Retained Comprehensive Treasury Noncontrolling Total
In millions Stock Stock Stock Other Earnings Income (Loss) Stock Interests Equity
Balance at December 31, 2010 (a) 526 $2,682 $ 647 $12,057 $15,859 $(431) $(572) $2,596 $32,838
Net income 3,056 15 3,071
Other comprehensive income (loss), net of tax
Net unrealized losses on other-than-temporary
impaired debt securities (92) (92)
Net unrealized securities gains 601 601
Net unrealized gains on cash flow hedge
derivatives 195 195
Pension, other postretirement and postemployment
benefit plan adjustments (375) (375)
Other (3) (3)
Comprehensive income (loss) 15 3,397
Cash dividends declared
Common (604) (604)
Preferred (56) (56)
Preferred stock discount accretion 2 (2)
Common stock activity 1 1 10 11
Treasury stock activity (36) 85 49
Preferred stock issuance Series O (e) 988 988
Other 41 582 623
Balance at December 31, 2011 (a) 527 $2,683 $1,637 $12,072 $18,253 $(105) $(487) $3,193 $37,246
(a) The par value of our preferred stock outstanding was less than $.5 million at each date and, therefore, is excluded from this presentation.
(b) Retained earnings at January 1, 2009 was increased $110 million representing the after-tax noncredit portion of other-than-temporary impairment losses recognized in net income
during 2008 that has been reclassified to accumulated other comprehensive income (loss).
(c) Net treasury stock activity totaled less than .5 million shares issued.
(d) Includes 63.9 million common shares issuance, the net proceeds of which were used together with other available funds to redeem the Series N (TARP) Preferred Stock, for a $3.4
billion net increase in total equity.
(e) 10,000 Series O preferred shares with a $1 par value were issued on July 20, 2011.
See accompanying Notes To Consolidated Financial Statements.

The PNC Financial Services Group, Inc. Form 10-K 105

CONSOLIDATED STATEMENT OF CASH FLOWS
THE PNC FINANCIAL SERVICES GROUP, INC.
Year ended December 31
In millions 2011 2010 2009
Operating Activities
Net income $ 3,071 $3,397 $2,403
Adjustments to reconcile net income to net cash provided (used) by operating activities
Provision for credit losses 1,152 2,502 3,930
Depreciation and amortization 1,140 1,059 978
Deferred income taxes 840 1,019 932
Net gains on sales of securities (249) (426) (550)
Net other-than-temporary impairments 152 325 577
Mortgage servicing rights valuation adjustment 726 434 (149)
Gain on sale of PNC Global Investment Servicing (639)
Gains on BlackRock transactions (160) (1,076)
Net gains related to BlackRock LTIP shares adjustments (103)
Noncash charge on trust preferred securities redemption 198
Undistributed earnings of BlackRock (262) (291) (144)
Net change in
Trading securities and other short-term investments 330 468 61
Loans held for sale 77 (1,154) 1,110
Other assets (4,142) 753 5,485
Accrued expenses and other liabilities 3,330 (1,571) (8,118)
Other (328) (904) 418
Net cash provided (used) by operating activities 6,035 4,812 5,754
Investing Activities
Sales
Securities available for sale 20,533 23,343 18,861
BlackRock stock via secondary common stock offering 1,198
Loans 1,770 1,868 644
Repayments/maturities
Securities available for sale 6,074 7,730 7,291
Securities held to maturity 2,859 2,433 495
Purchases
Securities available for sale (25,551) (36,653) (34,078)
Securities held to maturity (1,607) (1,296) (2,367)
Loans (2,401) (4,275) (970)
Net change in
Federal funds sold and resale agreements 1,487 (1,313) (560)
Interest-earning deposits with banks 441 2,684 10,237
Loans (10,224) 7,855 13,863
Net cash received from (paid for) acquisition and divestiture activity 430 2,202 (3,396)
Purchases of corporate and bank owned life insurance (200) (800)
Other (a) (160) 753 (541)
Net cash provided (used) by investing activities (6,549) 5,729 9,479

(continued on following page)

106 The PNC Financial Services Group, Inc. Form 10-K

CONSOLIDATED STATEMENT OF CASH FLOWS
THE PNC FINANCIAL SERVICES GROUP, INC.
(continued from previous page)
Year ended December 31
In millions 2011 2010 2009
Financing Activities
Net change in
Noninterest-bearing deposits $ 8,909 $5,872 $7,169
Interest-bearing deposits (4,863) (8,844) (9,849)
Federal funds purchased and repurchase agreements (1,151) 152 (1,173)
Federal Home Loan borrowings 1,000 (280) 280
Other borrowed funds (562) 380 (1,726)
Sales/issuances
Federal Home Loan borrowings 1,000 2,092
Bank notes and senior debt 1,244 3,230 2,461
Other borrowed funds 10,025 4,820 234
Preferred stock 988
Supervisory Capital Assessment Program common stock 624
Common and treasury stock 72 3,486 247
Repayments/maturities
Federal Home Loan borrowings (1,076) (4,373) (9,671)
Bank notes and senior debt (2,612) (2,808) (3,887)
Subordinated debt (1,942) (257) (1,000)
Other borrowed funds (8,977) (4,677) (211)
Preferred stock TARP (7,579)
Redemption of noncontrolling interest and other preferred stock (100)
Acquisition of treasury stock (73) (204) (188)
Preferred stock cash dividends paid (56) (146) (388)
Common stock cash dividends paid (604) (204) (430)
Net cash provided (used) by financing activities 1,322 (11,532) (15,416)
Net Increase (Decrease) In Cash And Due From Banks 808 (991) (183)
Cash and due from banks at beginning of period 3,297 4,288 4,471
Cash and due from banks at end of period $ 4,105 $3,297 $4,288
Supplemental Disclosures
Interest paid $ 1,517 $1,871 $3,151
Income taxes paid 842 752 66
Income taxes refunded 41 54 718
Non-cash Investing and Financing Items
Transfer from (to) loans to (from) loans held for sale, net 926 890 (172)
Transfer from loans to foreclosed assets 822 1,218 1,012
(a) Includes the impact of the consolidation of variable interest entities as of January 1, 2010.
See accompanying Notes To Consolidated Financial Statements.

The PNC Financial Services Group, Inc. Form 10-K 107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE PNC FINANCIAL SERVICES GROUP, INC.
BUSINESS
PNC is one of the largest diversified financial services
companies in the United States and is headquartered in
Pittsburgh, Pennsylvania.
PNC has businesses engaged in retail banking, corporate and
institutional banking, asset management, and residential
mortgage banking, providing many of its products and
services nationally and others in PNCs primary geographic
markets located in Pennsylvania, Ohio, New Jersey, Michigan,
Illinois, Maryland, Indiana, Kentucky, Florida, Washington,
D.C., Delaware, Virginia, Missouri, Wisconsin and Georgia.
PNC also provides certain products and services
internationally.
NOTE 1 ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
Our consolidated financial statements include the accounts of
the parent company and its subsidiaries, most of which are
wholly owned, and certain partnership interests and variable
interest entities.
We prepared these consolidated financial statements in
accordance with accounting principles generally accepted in
the United States of America (GAAP). We have eliminated
intercompany accounts and transactions. We have also
reclassified certain prior year amounts to conform to the 2011
presentation. These reclassifications did not have a material
impact on our consolidated financial condition or results of
operations.
See Note 2 Acquisition and Divestiture Activity regarding our
July 1, 2010 sale of PNC Global Investment Servicing Inc.
The Consolidated Income Statement for all periods presented
and related Notes To Consolidated Financial Statements
reflect the global investment servicing business as
discontinued operations.
We have considered the impact on these consolidated
financial statements of subsequent events.
USE OF ESTIMATES
We prepared these consolidated financial statements using
financial information available at the time, which requires us
to make estimates and assumptions that affect the amounts
reported. Our most significant estimates pertain to our fair
value measurements, allowances for loan and lease losses and
unfunded loan commitments and letters of credit, and
accretion on purchased impaired loans. Actual results may
differ from the estimates and the differences may be material
to the consolidated financial statements.
108 The PNC Financial Services Group, Inc. Form 10-K
INVESTMENT IN BLACKROCK, INC.
We account for our investment in the common stock and
Series B Preferred Stock of BlackRock (deemed to be
in-substance common stock) under the equity method of
accounting. The investment in BlackRock is reflected on our
Consolidated Balance Sheet in Equity investments, while our
equity in earnings of BlackRock is reported on our
Consolidated Income Statement in Asset management
revenue.
We also own approximately 1.5 million shares of Series C
Preferred Stock of BlackRock after delivery of approximately
1.3 million shares in September 2011 pursuant to our
obligation to partially fund a portion of certain BlackRock
long-term incentive plan (LTIP) programs. Since these
preferred shares are not deemed to be in substance common
stock, we have elected to account for these preferred shares at
fair value and the changes in fair value will offset the impact
of marking-to-market the obligation to deliver these shares to
BlackRock. Our investment in the BlackRock Series C
Preferred Stock is included on our Consolidated Balance Sheet
in Other assets.
As noted above, we mark-to-market our obligation to transfer
BlackRock shares related to certain BlackRock LTIP
programs. This obligation is classified as a derivative not
designated as a hedging instrument under GAAP as disclosed
in Note 16 Financial Derivatives.
BUSINESS COMBINATIONS
We record the net assets of companies that we acquire at their
estimated fair value at the date of acquisition and we include
the results of operations of the acquired companies on our
Consolidated Income Statement from the date of acquisition.
We recognize, as goodwill, the excess of the acquisition price
over the estimated fair value of the net assets acquired.
SPECIAL PURPOSE ENTITIES
Special purpose entities (SPEs) are defined as legal entities
structured for a particular purpose. We use special purpose
entities in various legal forms to conduct normal business
activities. We review the structure and activities of special
purpose entities for possible consolidation under the
applicable GAAP guidance.
A variable interest entity (VIE) is a corporation, partnership,
limited liability company, or any other legal structure used to
conduct activities or hold assets that either:
Does not have equity investors with voting rights that
can directly or indirectly make decisions about the
entitys activities through those voting rights or
similar rights, or
Has equity investors that do not provide sufficient
equity for the entity to finance its activities without
additional subordinated financial support.
A VIE often holds financial assets, including loans or
receivables, real estate or other property.
VIEs are assessed for consolidation under ASC 810
Consolidations when we hold variable interest in these
entities. We consolidate a VIE if we are its primary
beneficiary. The primary beneficiary of a VIE is determined to
be the party that meets both of the following criteria: (1) has
the power to make decisions that most significantly affect the
economic performance of the VIE and (2) has the obligation
to absorb losses or the right to receive benefits that in either
case could potentially be significant to the VIE. Upon
consolidation of a VIE, we recognize all of the VIEs assets,
liabilities and noncontrolling interests on our Consolidated
Balance Sheet. See Note 3 Loan Sale and Servicing Activities
and Variable Interest Entities for information about VIEs that
we do not consolidate but in which we hold a significant
variable interest.
On January 1, 2010, we adopted Accounting Standard Update
(ASU) 2009-17 Consolidations (Topic 810) Improvements
to Financial Reporting by Enterprises Involved with Variable
Interest Entities. This guidance replaces previous guidance
requiring an enterprise to perform a qualitative analysis as
opposed to a quantitative analysis to determine if it is the
primary beneficiary of a VIE. The qualitative analysis
considers the purpose and the design of the VIE as well as the
risks that the VIE was designed to either create or pass
through to variable interest holders. This guidance also
removed the scope exception for qualifying special-purpose
entities, contained new criteria for determining the primary
beneficiary of a VIE and increased the frequency of required
reassessments to determine whether an entity is the primary
beneficiary of a VIE. As a result of the adoption of ASU
2009-17, we consolidated Market Street Funding LLC
(Market Street), a credit card securitization trust, and certain
Low Housing Tax Credit (LIHTC) investments.
REVENUE RECOGNITION
We earn interest and noninterest income from various sources,
including:
Lending,
Securities portfolio,
Asset management,
Customer deposits,
Loan sales and servicing,
Brokerage services,
Sale of loans and securities,
Certain private equity activities, and
Securities and derivatives trading activities including
foreign exchange.
We also earn revenue from selling loans and securities and we
recognize income or loss from certain private equity activities.
We earn fees and commissions from:
Issuing loan commitments, standby letters of credit
and financial guarantees,
Selling various insurance products,
Providing treasury management services,
Providing merger and acquisition advisory and
related services, and
Participating in certain capital markets transactions.
Revenue earned on interest-earning assets including unearned
income and the amortization/accretion of premiums or
discounts recognized on acquired loans is recognized based on
the constant effective yield of the financial instrument.
Asset management fees are generally based on a percentage of
the fair value of the assets under management. This caption
also includes any performance fees which are generally based
on a percentage of the returns on such assets and are recorded
as earned. The caption Asset Management also includes our
share of the earnings of BlackRock recognized under the
equity method of accounting.
Service charges on deposit accounts are recognized when
earned. Brokerage fees and gains and losses on the sale of
securities and certain derivatives are recognized on a trade-
date basis.
We record private equity income or loss based on changes in
the valuation of the underlying investments or when we
dispose of our interest.
We recognize gain/(loss) on changes in the fair value of
certain financial instruments where we have elected the fair
value option. These financial instruments include certain
commercial and residential mortgage loans originated for sale,
certain residential mortgage portfolio loans, resale agreements
and our investment in BlackRock Series C preferred stock. We
also recognize gain/(loss) on changes in the fair value of
residential mortgage servicing rights (MSRs), which are
measured at fair value.
We recognize revenue from servicing residential mortgages,
commercial mortgages and other consumer loans as earned
based on the specific contractual terms. These revenues, as
well as impairment on servicing rights, are reported on the
Consolidated Income Statement in the line items Residential
mortgage, Corporate services, and Consumer service We
recognize revenue from securities, derivatives and foreign
The PNC Financial Services Group, Inc. Form 10-K 109
exchange trading, as well as securities underwriting activities,
as these transactions occur or as services are provided. We
recognize gains from the sale of loans upon receipt of cash.
When appropriate, revenue is reported net of associated
expenses in accordance with GAAP.
CASH AND CASH EQUIVALENTS
Cash and due from banks are considered cash and cash
equivalents for financial reporting purposes.
INVESTMENTS
We hold interests in various types of investments. The
accounting for these investments is dependent on a number of
factors including, but not limited to, items such as:
Ownership interest,
Our plans for the investment, and
The nature of the investment.
Debt Securities
Debt securities are recorded on a trade-date basis. We classify
debt securities as held to maturity and carry them at amortized
cost if we have the positive intent and ability to hold the
securities to maturity. Debt securities that we purchase for
short-term appreciation, trading purposes or those with
non-bifurcated embedded derivatives are carried at fair value
and classified as trading securities and other assets on our
Consolidated Balance Sheet. Realized and unrealized gains
and losses on trading securities are included in Other
noninterest income.
Debt securities not classified as held to maturity or trading are
designated as securities available for sale and carried at fair
value with unrealized gains and losses, net of income taxes,
reflected in Accumulated other comprehensive income (loss).
On January 1, 2009, we adopted new guidance impacting the
recognition and disclosure of other-than-temporary
impairments (OTTI). On at least a quarterly basis, we review
all debt securities that are in an unrealized loss position for
OTTI. An investment security is deemed impaired if the fair
value of the investment is less than its amortized cost.
Amortized cost includes adjustments (if any) made to the cost
basis of an investment for accretion, amortization, previous
other-than-temporary impairments and hedging gains and
losses. After an investment security is determined to be
impaired, we evaluate whether the decline in value is other-
than-temporary. As part of this evaluation, we take into
consideration whether we intend to sell the security or whether
it is more likely than not that we will be required to sell the
security before expected recovery of its amortized cost. We
also consider whether or not we expect to receive all of the
contractual cash flows from the investment based on factors
that include, but are not limited to: the creditworthiness of the
issuer and, in the case of securities collateralized by consumer
and commercial loan assets, the historical and projected
performance of the underlying collateral. In addition, we may
110 The PNC Financial Services Group, Inc. Form 10-K
also evaluate the business and financial outlook of the issuer,
as well as broader industry and sector performance indicators.
Declines in the fair value of available for sale debt securities
that are deemed other-than-temporary and are attributable to
credit deterioration are recognized on our Consolidated
Income Statement in the period in which the determination is
made. Declines in fair value which are deemed other-than-
temporary and attributable to factors other than credit
deterioration are recognized in Accumulated other
comprehensive income (loss) on our Consolidated Balance
Sheet.
We include all interest on debt securities, including
amortization of premiums and accretion of discounts on
investment securities in net interest income using the constant
effective yield method. Effective yields reflect either the
effective interest rate implicit in the security at the date of
acquisition or the effective interest rate determined based on
significantly improved cash flows subsequent to impairment.
We compute gains and losses realized on the sale of available
for sale debt securities on a specific security basis. These
securities gains/(losses) are included in the caption Net gains
on sales of securities on the Consolidated Income Statement.
In certain situations, management may elect to transfer certain
debt securities from the securities available for sale to the held
to maturity classification. In such cases, any unrealized gain or
loss at the date of transfer included in Accumulated other
comprehensive income (loss) is amortized over the remaining
life of the security as a yield adjustment. This amortization
offsets the effect on interest income of the amortization of the
premium or accretion of the discount on the security.
Equity Securities and Partnership Interests
We account for equity securities and equity investments other
than BlackRock and private equity investments under one of
the following methods:
Marketable equity securities are recorded on a trade-
date basis and are accounted for based on the
securities quoted market prices from a national
securities exchange. Those purchased with the
intention of recognizing short-term profits are
classified as trading and included in trading securities
and other assets on our Consolidated Balance Sheet.
Both realized and unrealized gains and losses on
trading securities are included in Noninterest income.
Marketable equity securities not classified as trading
are designated as securities available for sale with
unrealized gains and losses, net of income taxes,
reflected in Accumulated other comprehensive
income (loss). Any unrealized losses that we have
determined to be other-than-temporary on securities
classified as available for sale are recognized in
current period earnings.
For investments in limited partnerships, limited
liability companies and other investments that are not
required to be consolidated, we use either the equity
 method or the cost method of accounting. We use the
equity method for general and limited partner
ownership interests and limited liability companies in
which we are considered to have significant influence
over the operations of the investee and when the net
asset value of our investment reflects our economic
interest in the underlying investment. Under the
equity method, we record our equity ownership share
of net income or loss of the investee in noninterest
income. We use the cost method for all other
investments. Under the cost method, there is no
change to the cost basis unless there is an other-than-
temporary decline in value or dividends are received.
If the decline is determined to be other-than-
temporary, we write down the cost basis of the
investment to a new cost basis that represents
realizable value. The amount of the write-down is
accounted for as a loss included in Other noninterest
income. Distributions received from the income of an
investee on cost method investments are included in
noninterest income. Investments described above are
included in the caption Equity investments on the
Consolidated Balance Sheet.
Private Equity Investments
We report private equity investments, which include direct
investments in companies, affiliated partnership interests and
indirect investments in private equity funds, at estimated fair
value. These estimates are based on available information and
may not necessarily represent amounts that we will ultimately
realize through distribution, sale or liquidation of the
investments. Fair value of publicly traded direct investments are
determined using quoted market prices and are subject to
various discount factors for legal or contractual sales
restrictions, when appropriate. The valuation procedures applied
to direct investments in private companies include techniques
such as multiples of adjusted earnings of the entity, independent
appraisals, anticipated financing and sale transactions with third
parties, or the pricing used to value the entity in a recent
financing transaction. We value affiliated partnership interests
based on the underlying investments of the partnership using
procedures consistent with those applied to direct investments.
On October 1, 2009, we adopted ASU 2009-12 Fair Value
Measurements and Disclosures (Topic 820) Investments in
Certain Entities That Calculate Net Asset Value per Share (or
Its Equivalent). Based on the guidance, we value indirect
investments in private equity funds based on net asset value as
provided in the financial statements that we receive from their
managers. Due to the time lag in our receipt of the financial
information and based on a review of investments and valuation
techniques applied, adjustments to the manager-provided values
are made when available recent portfolio company information
or market information indicates significant changes in value
from that provided by the manager of the fund. We include all
private equity investments on the Consolidated Balance Sheet in
the caption Equity investments. Changes in the fair value of
private equity investments are recognized in noninterest
income.
We consolidate affiliated partnerships when we are the
general partner and have determined that we have control of
the partnership or are the primary beneficiary of the VIE. The
portion we do not own is reflected in the caption
Noncontrolling interests on the Consolidated Balance Sheet.
LOANS
Loans are classified as held for investment when management
has both the intent and ability to hold the loan for the
foreseeable future, or until maturity or payoff. Managements
intent and view of the foreseeable future may change based on
changes in business strategies, the economic environment,
market conditions and the availability of government
programs.
Measurement of delinquency status is based on the contractual
terms of each loan. Loans that are 30 days or more past due in
terms of payment are considered delinquent.
Except as described below, loans held for investment are
stated at the principal amounts outstanding, net of unearned
income, unamortized deferred fees and costs on originated
loans, and premiums or discounts on purchased loans. Interest
on performing loans originated (excluding purchased impaired
loans, which are further discussed below) are accrued based
on the principal amount outstanding and recorded in interest
income as earned using the constant effective yield method.
Loan origination fees, direct loan origination costs, and loan
premiums and discounts are deferred and accreted or
amortized into net interest income, over periods not exceeding
the contractual life of the loan.
When loans are redesignated from held for investment to held
for sale, specific reserves and allocated pooled reserves
included in the allowance for loan and lease losses (ALLL) are
charged-off to reduce the basis of the loans to the lower of
cost or estimated fair value less cost to sell.
In addition to originating loans, we also acquire loans through
portfolio purchases or acquisitions of other financial services
companies. For certain acquired loans that have experienced a
deterioration of credit quality, we follow the guidance
contained in ASC 310-30 Loans and Debt Securities
Acquired with Deteriorated Credit Quality. Under this
guidance, acquired purchased impaired loans are to be
recorded at fair value without the carryover of any existing
valuation allowances. Evidence of credit quality deterioration
may include information and statistics regarding bankruptcy
events, updated borrower credit scores, such as Fair Isaac
Corporation scores (FICO), past due status, and updated
loan-to-value (LTV) ratios. We review the loans acquired for
evidence of credit quality deterioration and determine if it is
probable that we will be unable to collect all contractual
amounts due, including both principal and interest. When both
conditions exist, we estimate the amount and timing of
undiscounted expected cash flows at acquisition for each loan
either individually or on a pool basis. We estimate the cash
The PNC Financial Services Group, Inc. Form 10-K 111
flows expected to be collected using internal models that
incorporate managements best estimate of current key
assumptions, such as default rates, loss severity and payment
speeds. Collateral values are also incorporated into cash flow
estimates. Late fees, which are contractual but not expected to
be collected, are excluded from expected future cash flows.
The accretable yield is calculated based upon the difference
between the undiscounted expected future cash flows of the
loans and the recorded investment in the loans. This amount is
accreted into income over the life of the loan or pool using the
constant effective yield method. Subsequent decreases in
expected cash flows that are attributable, at least in part, to
credit quality are recognized as impairments through a charge
to the provision for credit losses resulting in an increase in the
ALLL. Subsequent increases in expected cash flows are
recognized as a recovery of previously recorded ALLL or
prospectively through an adjustment of the loans or pools
yield over its remaining life.
The nonaccretable yield represents the difference between the
expected undiscounted cash flows of the loans and the total
contractual cash flows (including principal and future interest
payments) at acquisition and throughout the remaining lives of
the loans.
LEASES
We provide financing for various types of equipment, aircraft,
energy and power systems, and rolling stock and automobiles
through a variety of lease arrangements. Direct financing leases
are carried at the aggregate of lease payments plus estimated
residual value of the leased property, less unearned income.
Leveraged leases, a form of financing lease, are carried net of
nonrecourse debt. We recognize income over the term of the
lease using the constant effective yield method. Lease residual
values are reviewed for other-than-temporary impairment on an
annual basis. Gains or losses on the sale of leased assets are
included in Other noninterest income while valuation adjustments
on lease residuals are included in Other noninterest expense.
LOAN SALES, LOAN SECURITIZATIONS AND RETAINED
INTERESTS
We recognize the sale of loans or other financial assets when
the transferred assets are legally isolated from our creditors
and the appropriate accounting criteria are met. We have sold
mortgage, credit card and other loans through securitization
transactions. In a securitization, financial assets are transferred
into trusts or to SPEs in transactions to effectively legally
isolate the assets from PNC. Where the transferor is a
depository institution, legal isolation is accomplished through
compliance with specific rules and regulations of the relevant
regulatory authorities. Where the transferor is not a depository
institution, legal isolation is accomplished through utilization
of a two-step securitization structure.
ASC Topic 860 Accounting For Transfers of Financial
Assets requires a true sale legal analysis to address several
relevant factors, such as the nature and level of recourse to the
112 The PNC Financial Services Group, Inc. Form 10-K
transferor, and the amount and nature of retained interests in
the loans sold. The analytical conclusion as to a true sale is
never absolute and unconditional, but contains qualifications
based on the inherent equitable powers of a bankruptcy court,
as well as the unsettled state of the common law, or powers of
the FDIC as a conservator or receiver. Once the legal isolation
test has been met, other factors concerning the nature and
extent of the transferors control and the rights of the
transferee over the transferred assets are taken into account in
order to determine whether derecognition of assets is
warranted.
In a securitization, the trust or SPE issues beneficial interests
in the form of senior and subordinated securities backed or
collateralized by the assets sold to the trust. The senior classes
of the asset-backed securities typically receive investment
grade credit ratings at the time of issuance. These ratings are
generally achieved through the creation of lower-rated
subordinated classes of asset-backed securities, as well as
subordinated or residual interests. In certain cases, we may
retain a portion or all of the securities issued, interest-only
strips, one or more subordinated tranches, servicing rights and,
in some cases, cash reserve accounts. Securitized loans are
removed from the balance sheet and a net gain or loss is
recognized in noninterest income at the time of initial sale,
and each subsequent sale for revolving securitization
structures. Gains or losses recognized on the sale of the loans
depend on the fair value of the loans sold and the retained
interests at the date of sale. We generally estimate the fair
value of the retained interests based on the present value of
future expected cash flows using assumptions as to discount
rates, interest rates, prepayment speeds, credit losses and
servicing costs, if applicable.
Our loan sales and securitizations are generally structured
without recourse to us except for representations and
warranties and with no restrictions on the retained interests
with the exception of loan sales to certain US government
chartered entities.
We originate, sell and service mortgage loans under the
Federal National Mortgage Association (FNMA) Delegated
Underwriting and Servicing (DUS) program. Under the
provisions of the DUS program, we participate in a loss-
sharing arrangement with FNMA. We participated in a similar
program with the Federal Home Loan Mortgage Corporation
(FHLMC). When we are obligated for loss-sharing or
recourse, our policy is to record such liabilities initially at fair
value and subsequently reserve for estimated losses in
accordance with guidance contained in applicable GAAP.
Refer to Note 23 Commitments and Guarantees for more
information about our obligations related to sales of loans
under these programs.
On January 1, 2010, we adopted ASU 2009-16 Transfers
and Servicing (Topic 860) Accounting For Transfers of
Financial Assets. This guidance removed the concept of a
qualifying special-purpose entity under previous GAAP. The
guidance further clarified that an entity must consider all
arrangements or agreements made contemporaneously with or
in contemplation of a transfer even if not entered into at the
time of the transfer when applying surrender of control
conditions. Additionally, this guidance established conditions
for accounting and reporting for transfer of a portion of a
financial asset, modified the asset sale/derecognition criteria,
and changed how retained interests are initially measured.
LOANS HELD FOR SALE
We designate loans as held for sale when we have the intent to
sell them. We transfer loans to the Loans held for sale
category at the lower of cost or estimated fair value less cost
to sell. At the time of transfer, write-downs on the loans are
recorded as charge-offs. We establish a new cost basis upon
transfer. Any subsequent lower-of-cost-or-market adjustment
is determined on an individual loan basis and is recognized as
a valuation allowance with any charges included in Other
noninterest income. Gains or losses on the sale of these loans
are included in Other noninterest income when realized.
We have elected to account for certain commercial mortgage
loans held for sale at fair value. The changes in the fair value of
these loans are measured and recorded in Other noninterest
income each period. See Note 8 Fair Value for additional
information. Also, we elected to account for residential real estate
loans held for sale and securitizations acquired from National
City, which were not purchased impaired loans, at fair value.
Interest income with respect to loans held for sale classified as
performing is accrued based on the principal amount
outstanding using a constant effective yield method.
In certain circumstances, loans designated as held for sale may be
transferred to held for investment based on a change in strategy.
We transfer these loans at the lower of cost or estimated fair
value; however, any loans held for sale and designated at fair
value will remain at fair value for the life of the loan.
NONPERFORMING ASSETS
Nonperforming assets include:
Nonaccrual loans and leases,
Troubled debt restructurings, and
Other real estate owned and foreclosed assets.
Nonperforming loans are those loans that have deteriorated in
credit quality to the extent that full collection of original
contractual principal and interest is not probable. When a loan
is determined to be nonperforming (and as a result is
impaired), the accrual of interest is ceased and the loan is
classified as nonaccrual. The current year accrued and
uncollected interest is reversed out of net interest income.
A loan acquired and accounted for under ASC 310-30 Loans
and Debt Securities Acquired with Deteriorated Credit Quality
is reported as an accruing loan and a performing asset due to
the accretion of interest income.
We generally classify Commercial Lending (Commercial,
Commercial Real Estate, and Equipment Lease Financing)
loans as nonaccrual (and therefore nonperforming) when we
determine that the collection of interest or principal is not
probable or when delinquency of interest or principal payments
has existed for 90 days or more and the loans are not well-
secured and in the process of collection. A loan is considered
well-secured when the collateral in the form of liens on (or
pledges of) real or personal property, including marketable
securities, has a realizable value sufficient to discharge the debt
in full, including accrued interest. Such factors that would lead
to nonperforming status and subject the loan to an impairment
test would include, but are not limited to, the following:
Deterioration in the financial position of the borrower
resulting in the loan moving from accrual to cash
basis,
The collection of principal or interest is 90 days or
more past due unless the asset is both well-secured
and in the process of collection,
Reasonable doubt exists as to the certainty of the
future debt service ability, whether 90 days have
passed or not,
Customer has filed or will likely file for bankruptcy,
The bank advances additional funds to cover
principal or interest,
We are in the process of liquidation of a commercial
borrower, or
We are pursuing remedies under a guaranty.
We charge off commercial nonaccrual loans when we
determine that a specific loan, or portion thereof, is
uncollectible. This determination is based on the specific facts
and circumstances of the individual loans. In making this
determination, we consider the viability of the business or
project as a going concern, the past due status when the asset
is not well-secured, the expected cash flows to repay the loan,
the value of the collateral, and the ability and willingness of
any guarantors to perform.
Additionally, in general, for smaller dollar commercial loans
of $1 million or less, a partial or full charge-off will occur at
120 days past due for term loans and 180 days past due for
revolvers.
Home equity installment loans and lines of credit, as well as
residential real estate loans, that are well-secured are classified
as nonaccrual at 180 days past due. A consumer loan is
considered well-secured when the collateral in the form of
liens on (or pledges of) real or personal property, including
marketable securities, has a realizable value sufficient to
discharge the debt in full, including accrued interest.
Home equity installment loans and lines of credit and
residential real estate loans that are not well-secured and/or are
in the process of collection are charged off at 180 days past due
to the estimated fair value of the collateral less cost to sell. The
remaining portion of the loan is placed on nonaccrual status.
The PNC Financial Services Group, Inc. Form 10-K 113
Most consumer loans and lines of credit, not secured by
residential real estate, are charged off after 120 to 180 days
past due. Generally, they are not placed on nonaccrual status
as permitted by regulatory guidance.
If payment is received on a nonperforming loan, the payment is
first applied to the past due principal; once this principal
obligation has been fulfilled, payments are applied to recover
any partial charge-off related to the impaired loan that might
exist. Finally, if both past due principal and any partial
charge-off have been recovered, then the payment will result in
the recognition and recording of interest income. This process is
followed for impaired loans with the exception of troubled debt
restructurings (TDRs). Payments received on TDRs will be
applied in accordance with the terms of the TDR.
A TDR is a loan whose terms have been restructured in a
manner that grants a concession to a borrower experiencing
financial difficulties. TDRs may include restructuring certain
terms of loans, receipts of assets from debtors in partial
satisfaction of loans, or a combination thereof. TDRs are
included in nonperforming loans until returned to performing
status through the fulfilling of restructured terms for a
reasonable period of time (generally 6 months).
See Note 5 Asset Quality and Allowances for Loan and Lease
Losses and Unfunded Loan Commitments and Letters of
Credit for additional TDR information.
Nonperforming loans are generally not returned to performing
status until the obligation is brought current and the borrower
has performed in accordance with the contractual terms for a
reasonable period of time and collection of the contractual
principal and interest is no longer in doubt.
Foreclosed assets are comprised of any asset seized or
property acquired through a foreclosure proceeding or
acceptance of a deed-in-lieu of foreclosure. Other real estate
owned is comprised principally of commercial real estate and
residential real estate properties obtained in partial or total
satisfaction of loan obligations. Following the obtaining of a
foreclosure judgment, or in some jurisdictions the initiation of
proceedings under a power of sale in the loan instruments, the
property will be sold. When we acquire the deed, we transfer
the loan to other real estate owned included in Other assets on
our Consolidated Balance Sheet. Property obtained in
satisfaction of a loan is recorded at estimated fair value less
cost to sell. We estimate fair values primarily based on
appraisals, when available, or sales agreements with third
parties. Anticipated recoveries and government guarantees are
also considered in evaluating the potential impairment of
loans at the date of transfer. Based upon the estimated fair
value less cost to sell, the recorded investment of the loan, is
adjusted, and a charge-off/recovery is recognized to the
Allowance for Loan and Lease Losses (ALLL).
114 The PNC Financial Services Group, Inc. Form 10-K
Subsequently, foreclosed assets are valued at the lower of the
amount recorded at acquisition date or estimated fair value
less cost to sell. Valuation adjustments on these assets and
gains or losses realized from disposition of such property are
reflected in Other noninterest expense.
See Note 5 Asset Quality and Allowances for Loan and Lease
Losses and Unfunded Loan Commitments and Letters of
Credit for additional information.
ALLOWANCE FOR LOAN AND LEASE LOSSES
We maintain the ALLL at a level that we believe to be
appropriate to absorb estimated probable credit losses incurred
in the loan portfolio as of the balance sheet date. Our
determination of the allowance is based on periodic
evaluations of the loan and lease portfolios and other relevant
factors. This evaluation is inherently subjective as it requires
material estimates, all of which may be susceptible to
significant change, including, among others:
Probability of default (PD),
Loss given default (LGD),
Exposure at date of default (EAD),
Movement through delinquency stages,
Amounts and timing of expected future cash flows,
Value of collateral, and
Qualitative factors such as changes in current
economic conditions that may not be reflected in
historical results.
While our reserve methodologies strive to reflect all relevant
risk factors, there continues to be uncertainty associated with,
but not limited to, potential imprecision in the estimation
process due to the inherent time lag of obtaining information
and normal variations between estimates and actual outcomes.
We provide additional reserves that are designed to provide
coverage for losses attributable to such risks. The ALLL also
includes factors which may not be directly measured in the
determination of specific or pooled reserves. Such qualitative
factors may include:
Industry concentrations and conditions,
Recent credit quality trends,
Recent loss experience in particular portfolios,
Recent macro economic factors,
Changes in risk selection and underwriting standards,
and
Timing of available information.
In determining the appropriateness of the ALLL, we make
specific allocations to impaired loans and allocations to
portfolios of commercial and consumer loans. While
allocations are made to specific loans and pools of loans, the
total reserve is available for all credit losses.
Nonperforming loans are considered impaired under ASC
310-Receivables and are allocated a specific reserve. Specific
reserve allocations are determined as follows:
For commercial nonperforming loans greater than or
equal to a defined dollar threshold and TDRs,
specific reserves are based on an analysis of the
present value of the loans expected future cash
flows, the loans observable market price or the fair
value of the collateral.
For commercial nonperforming loans below the
defined dollar threshold, the loans are aggregated for
purposes of measuring specific reserve impairment
using the applicable loans LGD percentage
multiplied by the balance of the loan.
Consumer nonperforming loans are collectively
reserved for unless classified as TDRs, for which
specific reserves are based on an analysis of the
present value of the loans expected future cash
flows.
For purchased impaired loans, subsequent decreases
to the net present value of expected cash flows will
generally result in an impairment charge to the
provision for credit losses, resulting in an increase to
the ALLL.
When applicable, this process is applied across all the loan
classes in a similar manner. However, as previously discussed,
certain consumer loans and lines of credit, not secured by
residential real estate, are charged off instead of being
classified as nonperforming.
Our credit risk management policies, procedures and practices
are designed to promote sound lending standards and prudent
credit risk management. We have policies, procedures and
practices that address financial statement requirements,
collateral review and appraisal requirements, advance rates
based upon collateral types, appropriate levels of exposure,
cross-border risk, lending to specialized industries or borrower
type, guarantor requirements, and regulatory compliance.
See Note 5 Asset Quality and Allowances for Loan and Lease
Losses and Unfunded Loan Commitments and Letters of
Credit for additional information.
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND
LETTERS OF CREDIT
We maintain the allowance for unfunded loan commitments
and letters of credit at a level we believe is appropriate to
absorb estimated probable credit losses on these unfunded
credit facilities as of the balance sheet date. We determine the
allowance based on periodic evaluations of the unfunded
credit facilities, including an assessment of the probability of
commitment usage, credit risk factors, and, solely for
commercial lending, the terms and expiration dates of the
unfunded credit facilities. The allowance for unfunded loan
commitments and letters of credit is recorded as a liability on
the Consolidated Balance Sheet. Net adjustments to the
allowance for unfunded loan commitments and letters of
credit are included in the provision for credit losses.
The reserve for unfunded loan commitments is estimated in a
manner similar to the methodology used for determining
reserves for similar funded exposures. However, there is one
important distinction. This distinction lies in the estimation of
the amount of these unfunded commitments that will become
funded. This is determined using a cash conversion factor or
loan equivalency factor, which is a statistical estimate of the
amount of an unfunded commitment that will fund over a
given period of time. Once the future funded amount is
estimated, the calculation of the allowance follows similar
methodologies to those employed for on-balance sheet
exposure.
See Note 5 Asset Quality and Allowances for Loan and Lease
Losses and Unfunded Loan Commitments and Letters of
Credit for additional information.
MORTGAGE AND OTHER SERVICING RIGHTS
We provide servicing under various loan servicing contracts
for commercial, residential and other consumer loans. These
contracts are either purchased in the open market or retained
as part of a loan securitization or loan sale. All newly acquired
or originated servicing rights are initially measured at fair
value. Fair value is based on the present value of the expected
future cash flows, including assumptions as to:
Deposit balances and interest rates for escrow and
commercial reserve earnings,
Discount rates,
Stated note rates,
Estimated prepayment speeds, and
Estimated servicing costs.
For subsequent measurements of these assets, we have elected
to utilize either the amortization method or fair value
measurement based upon the asset class and our risk
management strategy for managing these assets. For
commercial mortgage loan servicing rights, we use the
amortization method. This election was made based on the
unique characteristics of the commercial mortgage loans
underlying these servicing rights with regard to market inputs
used in determining fair value and how we manage the risks
inherent in the commercial mortgage servicing rights assets.
Specific risk characteristics of commercial mortgages include
loan type, currency or exchange rate, interest rates, expected
cash flows and changes in the cost of servicing. We record
these servicing assets as Other intangible assets and amortize
them over their estimated lives based on estimated net
servicing income. On a quarterly basis, we test the assets for
impairment by categorizing the pools of assets underlying the
servicing rights into various strata. If the estimated fair value
of the assets is less than the carrying value, an impairment loss
is recognized and a valuation reserve is established.
The PNC Financial Services Group, Inc. Form 10-K 115
For servicing rights related to residential real estate loans, we
apply the fair value method. This election was made to be
consistent with our risk management strategy to hedge
changes in the fair value of these assets. We manage this risk
by hedging the fair value of this asset with derivatives and
securities which are expected to increase in value when the
value of the servicing right declines. The fair value of these
servicing rights is estimated by using a cash flow valuation
model which calculates the present value of estimated future
net servicing cash flows, taking into consideration actual and
expected mortgage loan prepayment rates, discount rates,
servicing costs, and other economic factors which are
determined based on current market conditions.
Revenue from the various loan servicing contracts for
commercial, residential and other consumer loans is reported
on the Consolidated Income Statement in line items Corporate
services, Residential mortgage and Consumer services.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments and the methods and
assumptions used in estimating fair value amounts and
financial assets and liabilities for which fair value was elected
based on the fair value guidance are detailed in Note 8 Fair
Value.
GOODWILL AND OTHER INTANGIBLE ASSETS
We assess goodwill for impairment at least annually, in the
fourth quarter, or when events or changes in circumstances
indicate the assets might be impaired. Finite-lived intangible
assets are amortized to expense using accelerated or straight-
line methods over their respective estimated useful lives. We
review finite-lived intangible assets for impairment when
events or changes in circumstances indicate that the assets
carrying amount may not be recoverable from undiscounted
future cash flows or that it may exceed its fair value.
DEPRECIATION AND AMORTIZATION
For financial reporting purposes, we depreciate premises and
equipment, net of salvage value, principally using the straight-
line method over their estimated useful lives.
We use estimated useful lives for furniture and equipment
ranging from one to 10 years, and depreciate buildings over an
estimated useful life of up to 40 years. We amortize leasehold
improvements over their estimated useful lives of up to 15
years or the respective lease terms, whichever is shorter.
We purchase, as well as internally develop and customize,
certain software to enhance or perform internal business
functions. Software development costs incurred in the
planning and post-development project stages are charged to
noninterest expense. Costs associated with designing software
configuration and interfaces, installation, coding programs and
testing systems are capitalized and amortized using the
straight-line method over periods ranging from one to seven
years.
116 The PNC Financial Services Group, Inc. Form 10-K
REPURCHASE AND RESALE AGREEMENTS
Repurchase and resale agreements are treated as collateralized
financing transactions and are carried at the amounts at which
the securities will be subsequently reacquired or resold,
including accrued interest, as specified in the respective
agreements. Our policy is to take possession of securities
purchased under agreements to resell. We monitor the market
value of securities to be repurchased and resold and additional
collateral may be obtained where considered appropriate to
protect against credit exposure. We have elected to account
for resale agreements at fair value.
OTHER COMPREHENSIVE INCOME
Other comprehensive income consists, on an after-tax basis,
primarily of unrealized gains or losses, excluding OTTI
attributable to credit deterioration, on investment securities
classified as available for sale, derivatives designated as cash
flow hedges, and changes in pension, other postretirement and
postemployment benefit plan liability adjustments. Details of
each component are included in Note 19 Other
Comprehensive Income.
TREASURY STOCK
We record common stock purchased for treasury at cost. At
the date of subsequent reissue, the treasury stock account is
reduced by the cost of such stock on the first-in, first-out
basis.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
We use a variety of financial derivatives as part of our overall
asset and liability risk management process to help manage
interest rate, market and credit risk inherent in our business
activities. Interest rate and total return swaps, swaptions,
interest rate caps and floors and futures contracts are the
primary instruments we use for interest rate risk management.
Financial derivatives involve, to varying degrees, interest rate,
market and credit risk. We manage these risks as part of our
asset and liability management process and through credit
policies and procedures. We seek to minimize counterparty
credit risk by entering into transactions with only high-quality
institutions, establishing credit limits, and generally requiring
bilateral netting and collateral agreements.
We recognize all derivative instruments at fair value as either
Other assets or Other liabilities on the Consolidated Balance
Sheet and the related cash flows in the Operating Activities
section of the Consolidated Statement Of Cash Flows.
Adjustments for counterparty credit risk are included in the
determination of their fair value. The accounting for changes in
the fair value of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship.
For derivatives not designated as an accounting hedge, changes in
fair value are recognized in noninterest income.
We utilize a net presentation for derivative instruments on the
Consolidated Balance Sheet taking into consideration the
effects of legally enforceable master netting agreements. Cash
collateral exchanged with counterparties is also netted against
the applicable derivative exposures by offsetting obligations to
return or rights to reclaim cash collateral against the fair
values of the net derivatives being collateralized.
For those derivative instruments that are designated and
qualify as accounting hedges, we designate the hedging
instrument, based on the exposure being hedged, as either a
fair value hedge, a cash flow hedge or a hedge of the net
investment in a foreign operation.
We formally document the relationship between the hedging
instruments and hedged items, as well as the risk management
objective and strategy, before undertaking an accounting
hedge. To qualify for hedge accounting, the derivatives and
related hedged items must be designated as a hedge at
inception of the hedge relationship. For accounting hedge
relationships, we formally assess, both at the inception of the
hedge and on an ongoing basis, if the derivatives are highly
effective in offsetting designated changes in the fair value or
cash flows of the hedged item. If it is determined that the
derivative instrument is not highly effective, hedge accounting
is discontinued.
For derivatives that are designated as fair value hedges (i.e.,
hedging the exposure to changes in the fair value of an asset
or a liability attributable to a particular risk, such as changes
in LIBOR), changes in the fair value of the hedging
instrument are recognized in earnings and offset by also
recognizing in earnings the changes in the fair value of the
hedged item attributable to the hedged risk. To the extent the
change in fair value of the derivative does not offset the
change in fair value of the hedged item, the difference or
ineffectiveness is reflected in the Consolidated Income
Statement in the same financial statement category as the
hedged item.
For derivatives designated as cash flow hedges (i.e., hedging
the exposure to variability in expected future cash flows), the
effective portions of the gain or loss on derivatives are
reported as a component of Accumulated other comprehensive
income (loss) and subsequently reclassified to interest income
in the same period or periods during which the hedged
transaction affects earnings. The change in fair value
attributable to the ineffective portion of the hedging
instrument is recognized immediately in noninterest income.
For derivatives designated as a hedge of net investment in a
foreign operation, the effective portions of the gain or loss on
the derivatives are reported as a component of Accumulated
other comprehensive income (loss). The change in fair value
of any ineffectiveness of the hedging instrument is recognized
immediately in noninterest income.
We discontinue hedge accounting when it is determined that
the derivative no longer qualifies as an effective hedge; the
derivative expires or is sold, terminated or exercised; or the
derivative is de-designated as a fair value or cash flow hedge
or, for a cash flow hedge, it is no longer probable that the
forecasted transaction will occur by the end of the originally
specified time period. If we determine that the derivative no
longer qualifies as a fair value or cash flow hedge and hedge
accounting is discontinued, the derivative will continue to be
recorded on the balance sheet at its fair value with changes in
fair value included in current earnings. For a discontinued fair
value hedge, the previously hedged item is no longer adjusted
for changes in fair value.
When hedge accounting is discontinued because it is no longer
probable that a forecasted transaction will occur, the
derivative will continue to be recorded on the balance sheet at
its fair value with changes in fair value included in current
earnings, and the gains and losses in Accumulated other
comprehensive income (loss) will be recognized immediately
into earnings. When we discontinue hedge accounting because
the hedging instrument is sold, terminated or no longer
designated, the amount reported in Accumulated other
comprehensive income (loss) up to the date of sale,
termination or de-designation continues to be reported in
Other comprehensive income or loss until the forecasted
transaction affects earnings. We did not terminate any cash
flow hedges in 2011, 2010 or 2009 due to a determination that
a forecasted transaction was no longer probable of occurring.
We purchase or originate financial instruments that contain an
embedded derivative. At the inception of the transaction, we
assess if the economic characteristics of the embedded
derivative are clearly and closely related to the economic
characteristics of the host contract, whether the hybrid
financial instrument is measured at fair value with changes in
fair value reported in earnings, and whether a separate
instrument with the same terms as the embedded derivative
would be a derivative. If the embedded derivative does not
meet all of these conditions, the embedded derivative is
recorded separately from the host contract with changes in fair
value recorded in earnings, unless we elect to account for the
hybrid instrument at fair value.
We have elected on an instrument-by-instrument basis, fair
value measurement for certain financial instruments with
embedded derivatives.
We enter into commitments to originate residential and
commercial mortgage loans for sale. We also enter into
commitments to purchase or sell commercial and residential real
estate loans. These commitments are accounted for as free-
standing derivatives which are recorded at fair value in Other
assets or Other liabilities on the Consolidated Balance Sheet. Any
gain or loss from the change in fair value after the inception of
the commitment is recognized in noninterest income.
INCOME TAXES
We account for income taxes under the asset and liability
method. Deferred tax assets and liabilities are determined
based on differences between the financial reporting and tax
bases of assets and liabilities and are measured using the
The PNC Financial Services Group, Inc. Form 10-K 117
enacted tax rates and laws that we expect will apply at the
time when we believe the differences will reverse. The
realization of deferred tax assets requires an assessment to
determine the realization of such assets. Realization refers to
the incremental benefit achieved through the reduction in
future taxes payable or refunds receivable from the deferred
tax assets, assuming that the underlying deductible differences
and carryforwards are the last items to enter into the
determination of future taxable income. We establish a
valuation allowance for tax assets when it is more likely than
not that they will not be realized, based upon all available
positive and negative evidence.
EARNINGS PER COMMON SHARE
Basic earnings per common share is calculated using the
two-class method to determine income attributable to common
shareholders. Unvested share-based payment awards that
contain nonforfeitable rights to dividends or dividend
equivalents are considered participating securities under the
two-class method. Income attributable to common
shareholders is then divided by the weighted-average common
shares outstanding for the period.
Diluted earnings per common share is calculated under the
more dilutive of either the treasury method or the two-class
method. For the diluted calculation, we increase the weighted-
average number of shares of common stock outstanding by the
assumed conversion of outstanding convertible preferred stock
and debentures from the beginning of the year or date of
issuance, if later, and the number of shares of common stock
that would be issued assuming the exercise of stock options
and warrants and the issuance of incentive shares using the
treasury stock method. These adjustments to the weighted-
average number of shares of common stock outstanding are
made only when such adjustments will dilute earnings per
common share. See Note 17 Earnings Per Share for additional
information.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2011, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) 2011-11
- Balance Sheet (Topic 210) Disclosures about Offsetting
Assets and Liabilities. This ASU applies to all entities that
have financial instruments and derivative instruments that are
either (1) offset in accordance with either ASC 210-20-45 or
ASC 815-10-45 or (2) subject to an enforceable master netting
arrangement or similar agreement. Under this ASU, an entity
is required to disclose information about offsetting and related
arrangements to enable users of its financial statements to
understand the effect of those arrangements on its financial
position. This ASU is effective for annual reporting periods
beginning on or after January 1, 2013, and interim periods
within those annual periods. The disclosures required by the
ASU are to be applied retrospectively for all comparative
periods presented. We will adopt the new disclosure
requirements on January 1, 2013.
118 The PNC Financial Services Group, Inc. Form 10-K
In December 2011, the FASB also finalized ASU 2011-10
Property, Plant, and Equipment (Topic 360) Derecognition
of in Substance Real Estate a Scope Clarification (a
consensus of the FASB Emerging Issues Task Force). This
ASU clarified that the guidance in ASC 360-20 applies to a
parent that ceases to have a controlling financial interest (as
described in ASC 810-10) in a subsidiary that is in substance
real estate as a result of default on the subsidiarys
nonrecourse debt. The amendments within this update should
be applied on a prospective basis and are effective for fiscal
years, and interim periods within those years, beginning on or
after June 15, 2012. The adoption of this new guidance is not
expected to have a material effect on our results of operations
or financial position.
In September 2011, the FASB issued ASU 2011-08
Intangibles Goodwill and Other (Topic 350) Testing
Goodwill for Impairment. Annually, the ASU permits an
entity to first assess qualitative factors to determine whether it
is more likely than not that the fair value of a reporting unit is
less than its carrying amount. If an entity qualitatively
determines the fair value of a reporting unit is greater than its
carrying amount, it is not required to perform the step 1
quantitative goodwill impairment test for the reporting unit.
ASU 2011-08 is effective for annual and interim goodwill
impairment tests performed for fiscal years beginning after
December 15, 2011. The adoption of this new guidance is not
expected to have a material effect on our results of operations
or financial position.
In June 2011, the FASB issued ASU 2011-05 -
Comprehensive Income (Topic 220), Presentation of
Comprehensive Income. This ASU will require an entity to
present each component of net income along with total net
income, each component of other comprehensive income
along with total other comprehensive income, and a total
amount for comprehensive income either in a single
continuous statement of comprehensive income or in two
separate but consecutive statements. In both presentation
options, the tax effect for each component must be presented
in the statement in which other comprehensive income is
presented or disclosed in the notes to the financial statements.
This ASU does not change the items that must be reported in
other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. In
December 2011, the FASB issued ASU 2011-12
Comprehensive Income (Topic 220), Deferral of the Effective
Date for Amendments to the Presentation of Reclassifications
of Items Out of Accumulated Other Comprehensive Income in
ASU 2011-05. This ASU defers those changes in ASU
2011-05 that relate to the presentation of reclassification
adjustments as the Board redeliberates this item. Entities
should continue to report reclassifications out of accumulated
other comprehensive income consistent with the presentation
requirements in effect before ASU 2011-05. For PNC, the
requirements included in ASU 2011-05 and ASU 2011-12 are
effective for fiscal years, and interim periods within those
years, beginning after December 15, 2011. We will adopt the
new disclosure requirements on January 1, 2012.
In May 2011, the FASB issued ASU 2011-04 - Fair Value
Measurement (Topic 820), Amendments to Achieve Common
Fair Value Measurement and Disclosure Requirements in U.S.
GAAP and IFRS. This ASU provides guidance to clarify the
concept of highest and best use valuation premise, how a
principal market is determined, and the application of the fair
value measurement for instruments with offsetting market or
counterparty credit risks. It also extends the prohibition on
blockage factors to all fair value hierarchy levels. This ASU
will require additional disclosures for the following:
(1) quantitative information about the significant unobservable
inputs used in all Level 3 financial instruments, (2) the
valuation processes used by the reporting entity as well as a
narrative description of the sensitivity of the fair value
measurement to changes in unobservable inputs, (3) a
reporting entitys use of a nonfinancial asset in a way that
differs from the assets highest and best use if the fair value of
the asset is reported, (4) the categorization by level of the fair
value hierarchy for items that are not measured at fair value in
financial statements and (5) any transfers between Level 1 and
2 and the reason for those transfers. ASU 2011-04 is effective
for the first interim or annual period beginning after
December 15, 2011, and should be applied prospectively. The
adoption of this new guidance is not expected to have a
material effect on our results of operations or financial
position.
In April 2011, the FASB issued ASU 2011-03 Transfers and
Servicing (Topic 860), Reconsideration of Effective Control
for Repurchase Agreements. This ASU removes from the
assessment of effective control (1) the criterion requiring the
transferor to have the ability to repurchase or redeem the
financial assets on substantially the agreed terms, even in the
event of default by the transferee, and (2) the collateral
maintenance implementation guidance related to that criterion.
Other criteria applicable to the assessment of effective control
have not been changed by this ASU. ASU 2011-03 is effective
for the first interim or annual period beginning on or after
December 15, 2011 and should be applied prospectively to
transactions or modifications of existing transactions that
occur on or after the effective date. The adoption of this new
guidance is not expected to have a material effect on our
results of operations or financial position.
In April 2011, the FASB issued ASU 2011-02 Receivables
(Topic 310), A Creditors Determination of Whether a
Restructuring Is a Troubled Debt Restructuring. The ASU
clarifies when a loan restructuring constitutes a troubled debt
restructuring (TDR). This ASU (1) eliminates the sole use of
the borrowers effective interest rate test to determine if a
concession has occurred on the part of the creditor,
(2) requires a restructuring with below market terms to be
considered in determining classification as a TDR,
(3) specifies that a borrower not currently in default may still
be experiencing financial difficulty when payment default is
probable in the foreseeable future, and (4) specifies that a
delay in payment should be considered along with all other
factors in determining classification as a TDR. The ASU
guidance was effective for interim and annual periods
beginning after June 15, 2011 and was to be applied
retrospectively to the beginning of the annual period of
adoption.
As a result of adopting the amendments in ASU 2011-02, we
reassessed all restructurings that occurred on or after the
beginning of the current fiscal year (January 1, 2011) for
identification as TDRs. We identified as TDRs certain loans
for which the allowance for credit losses had previously been
measured under a general allowance for credit losses
methodology. Upon identifying those loans as TDRs, we
accounted for them as impaired under the guidance in ASC
310-10-35. The amendments in ASU 2011-02 require
prospective application of the impairment measurement
guidance in ASC 310-10-35 for those loans newly identified
as TDRs. Accordingly, at the end of the first interim period of
adoption (September 30, 2011), the recorded investment in
receivables for which the allowance for credit losses was
previously measured under a general allowance for credit
losses methodology and are now measured under ASC
310-10-35 was approximately $69 million and the allowance
for credit losses associated with those receivables was
approximately $21 million. Additionally, we adopted ASU
2010-20 Receivables (Topic 310), Disclosures about the
Credit Quality of Financing Receivables and the Allowance
for Credit Losses for TDR disclosures. See Note 5 Asset
Quality and Allowances for Loan and Lease Losses and
Unfunded Loan Commitments and Letters of Credit for
additional information.
In January 2010, the FASB issued ASU 2010-06 Fair Value
Measurements and Disclosures (Topic 820), Improving
Disclosures About Fair Value Measurements. This ASU
required purchases, sales, issuances and settlements to be
reported separately in the Level 3 fair value measurement
rollforward beginning with the first quarter 2011 reporting.
See Note 8 Fair Value for additional information.
The PNC Financial Services Group, Inc. Form 10-K 119
NOTE 2 ACQUISITION AND DIVESTITURE SALE OF PNC GLOBAL INVESTMENT SERVICING
ACTIVITY On July 1, 2010, we sold PNC Global Investment Servicing
Inc. (GIS), a leading provider of processing, technology and
PENDING ACQUISITION OF RBC BANK (USA)
business intelligence services to asset managers, broker-
On June 19, 2011, we entered into a definitive agreement with
dealers and financial advisors worldwide, for $2.3 billion in
Royal Bank of Canada and RBC USA Holdco Corporation to
cash pursuant to a definitive agreement entered into on
acquire RBC Bank (USA), the US retail banking subsidiary of
February 2, 2010. This transaction resulted in a pretax gain of
Royal Bank of Canada, for $3.45 billion. The purchase price is
$639 million, net of transaction costs, in the third quarter of
subject to certain adjustments, including adjustments based on
2010. This gain and results of operations of GIS through
the closing date tangible net asset value of RBC Bank (USA),
June 30, 2010 are presented as Income from discontinued
as defined in the definitive agreement. Although PNC has the
operations, net of income taxes, on our Consolidated Income
option to pay up to $1.0 billion of the purchase price using
Statement. As part of the sale agreement, PNC has agreed to
shares of PNC common stock under the terms of the
provide certain transitional services on behalf of GIS until
agreement, PNC currently does not plan to issue any shares of
completion of related systems conversion activities. There
PNC common stock as part of the consideration. PNC has also
were no assets or liabilities of GIS remaining on our
agreed to acquire certain credit card accounts of RBC Bank
Consolidated Balance Sheet at December 31, 2010.
(USA) customers issued by RBC Bank (Georgia), National
Association, a wholly-owned subsidiary of Royal Bank of
Canada. NOTE 3 LOAN SALE AND SERVICING ACTIVITIES
AND VARIABLE INTEREST ENTITIES
RBC Bank (USA) has approximately $25 billion (unaudited)
LOAN SALE AND SERVICING ACTIVITIES
in proforma assets as reflected in the definitive agreement to
We have transferred residential and commercial mortgage
be included in the transaction and more than 400 branches in
loans in securitization or sales transactions in which we have
North Carolina, Florida, Alabama, Georgia, Virginia and
continuing involvement. These transfers have occurred
South Carolina. The transaction is expected to close in March
through Agency securitization, Non-Agency securitization,
2012, subject to remaining customary closing conditions.
and whole-loan sale transactions. Agency securitizations
consist of securitization transactions with Federal National
FLAGSTAR BRANCH ACQUISITION
Mortgage Association (FNMA), Federal Home Loan
Effective December 9, 2011, PNC acquired 27 branches in the
Mortgage Corporation (FHLMC), and Government National
northern metropolitan Atlanta, Georgia area from Flagstar
Mortgage Association (GNMA) (collectively the Agencies).
Bank, FSB, a subsidiary of Flagstar Bancorp, Inc. The fair
FNMA and FHLMC generally securitize our transferred loans
value of the assets acquired totaled approximately $211.8
into mortgage-backed securities for sale into the secondary
million, including $169.3 million in cash, $24.3 million in
market through special purpose entities (SPEs) they sponsor.
fixed assets and $18.2 million of goodwill and intangible
We, as an authorized GNMA issuer/servicer, pool Federal
assets. We also assumed approximately $210.5 million of
Housing Administration (FHA) and Department of Veterans
deposits associated with these branches. No deposit premium
Affairs (VA) insured loans into mortgage-backed securities
was paid and no loans were acquired in the transaction. Our
for sale into the secondary market. In Non-Agency
Consolidated Income Statement includes the impact of the
securitizations, we have transferred loans into securitization
branch activity subsequent to our December 9, 2011
SPEs. In other instances third-party investors have purchased
acquisition.
(in whole-loan sale transactions) and subsequently sold our
loans into securitization SPEs. Third-party investors have also
BANKATLANTIC BRANCH ACQUISITION
purchased our loans in whole-loan sale transactions.
Effective June 6, 2011, PNC acquired 19 branches in the
Securitization SPEs, which are legal entities that are utilized
greater Tampa, Florida area from BankAtlantic, a subsidiary
in the Agency and Non-Agency securitization transactions, are
of BankAtlantic Bancorp, Inc. The fair value of the assets
VIEs.
acquired totaled approximately $324.9 million, including
$256.9 million in cash, $26.0 million in fixed assets and $42.0
Our continuing involvement in the Agency securitizations,
million of goodwill and intangible assets. We also assumed
Non-Agency securitizations, and whole-loan sale transactions
approximately $324.5 million of deposits associated with
generally consists of servicing, repurchases of previously
these branches. A $39.0 million deposit premium was paid
transferred loans and loss share arrangements, and, in limited
and no loans were acquired in the transaction. Our
circumstances, holding of mortgage-backed securities issued
Consolidated Income Statement includes the impact of the
by the securitization SPEs.
branch activity subsequent to our June 6, 2011 acquisition.

120 The PNC Financial Services Group, Inc. Form 10-K

Depending on the transaction, we may act as the master,
primary, and/or special servicer to the securitization SPEs or
third-party investors. Servicing responsibilities typically
consist of collecting and remitting monthly borrower principal
and interest payments, maintaining escrow deposits,
performing loss mitigation and foreclosure activities, and, in
certain instances, funding of servicing advances. Servicing
advances, which are reimbursable, are recognized in Other
assets at cost and are made for principal and interest and
collateral protection.
We earn servicing and other ancillary fees for our role as
servicer and, depending on the contractual terms of the
servicing arrangement, we can be terminated as servicer with
or without cause. At the consummation date of each type of
loan transfer, we recognize a servicing asset at fair value.
Servicing assets are recognized in Other intangible assets on
our Consolidated Balance Sheet and are classified within
Level 3 of the fair value hierarchy. See Note 8 Fair Value and
Note 9 Goodwill and Other Intangible Assets for further
discussion of our residential and commercial servicing assets.
Certain loans transferred to the Agencies contain removal of
account provisions (ROAPs). Under these ROAPs, we hold an
option to repurchase at par individual delinquent loans that
meet certain criteria. When we have the unilateral ability to
repurchase a delinquent loan, effective control over the loan
has been regained and we recognize an asset (in either Loans
or Loans held for sale) and a corresponding liability (in Other
borrowed funds) on the balance sheet regardless of our intent
to repurchase the loan. At December 31, 2011 and
December 31, 2010, balances recognized in Loans and Other
borrowed funds associated with our ROAP option totaled
$265 million and $336 million, respectively.
We generally do not retain mortgage-backed securities issued
by the Agency and Non-Agency securitization SPEs at the
inception of the securitization transactions. Rather, our limited
holdings of these securities occur through subsequent
purchases in the secondary market. PNC does not retain any
credit risk on its Agency mortgage-backed security positions
as FNMA, FHLMC, and the US Government (for GNMA)
guarantee losses of principal and interest. We generally hold a
senior class of Non-Agency mortgage-backed securities.
We also have involvement with certain Agency and
Non-Agency commercial securitization SPEs where we have
not transferred commercial mortgage loans. These SPEs were
sponsored by independent third-parties and the loans held by
these entities were purchased exclusively from other third-
parties. Generally, our involvement with these SPEs is as
servicer with servicing activities consistent with those
described above. In certain instances, we can be terminated as
servicer in these commercial securitization structures without
cause by the controlling class of mortgage-backed security
holders of the SPE.
We recognize a liability for our loss exposure associated with
contractual obligations to repurchase previously transferred
loans due to breaches of representations and warranties and
also for loss sharing arrangements (recourse obligations) with
the Agencies. Other than providing temporary liquidity under
servicing advances and our loss exposure associated with our
repurchase and recourse obligations, we have not provided nor
are we required to provide any type of credit support,
guarantees, or commitments to the securitization SPEs or
third-party investors in these transactions. See Note 23
Commitments and Guarantees for further discussion of our
repurchase and recourse obligations.
The PNC Financial Services Group, Inc. Form 10-K 121
The following table provides information related to certain financial information associated with PNCs loan sale and servicing
activities:

Certain Financial Information and Cash Flows Associated with Loan Sale and Servicing Activities
Home Equity
Residential Commercial Loans/
In millions Mortgages Mortgages (a) Lines (b)

FINANCIAL INFORMATION December 31, 2011

Servicing portfolio (c) $118,058 $155,813 $5,661
Carrying value of servicing assets (d) 647 468 1
Servicing advances (e) 563 510 8
Servicing deposits (f) 2,264 3,861 38
Repurchase and recourse obligations (g) 83 47 47
Carrying value of mortgage-backed securities held (h) 4,654 1,839
FINANCIAL INFORMATION December 31, 2010
Servicing portfolio (c) $125,806 $162,514 $6,041
Carrying value of servicing assets (d) 1,033 665 2
Servicing advances (e) 533 415 21
Servicing deposits (f) 2,661 3,537 61
Repurchase and recourse obligations (g) 144 54 150
Carrying value of mortgage-backed securities held (h) 2,171 1,875

The following table provides information related to the cash flows associated with PNCs loan sale and servicing activities:
Home Equity
Residential Commercial Loans/
In millions Mortgages Mortgages (a) Lines (b)
CASH FLOWS Year ended December 31, 2011
Sales of loans (i) $11,920 $2,351
Repurchases of previously transferred loans (j) 1,683 $42
Contractual servicing fees received 355 179 22
Servicing advances recovered/(funded), net (30) (95) 12
Cash flows on mortgage-backed securities held (h) 586 419
CASH FLOWS Year ended December 31, 2010
Sales of loans (i) $ 9,951 $2,413
Repurchases of previously transferred loans (j) 2,283 $28
Contractual servicing fees received 413 224 26
Servicing advances recovered/(funded), net 66 (32) 2
Cash flows on mortgage-backed securities held (h) 588 510
(a) Represents financial and cash flow information associated with both commercial mortgage loan transfer and servicing activities.
(b) These activities were part of an acquired brokered home equity business in which PNC is no longer engaged. See Note 23 Commitments and Guarantees for further information.
(c) For our continuing involvement with residential mortgages and home equity loan/line transfers, amount represents outstanding balance of loans transferred and serviced. For
commercial mortgages, amount represents the portion of the overall servicing portfolio in which loans have been transferred by us or third parties to VIEs.
(d) See Note 8 Fair Value and Note 9 Goodwill and Other Intangible Assets for further information.
(e) Pursuant to certain contractual servicing agreements, represents outstanding balance of funds advanced (i) to investors for monthly collections of borrower principal and interest,
(ii) for borrower draws on unused home equity lines of credit, and (iii) for collateral protection associated with the underlying mortgage collateral.
(f) Represents balances in custodial and escrow demand deposit accounts held at PNC on behalf of investors. Borrowers loan payments including escrows are deposited in these accounts
prior to their distribution.
(g) Represents liability for our loss exposure associated with loan repurchases for breaches of representations and warranties for our Residential Mortgage Banking and Non-Strategic
Assets Portfolio segments, and our multi-family commercial mortgage loss share arrangements for our Corporate & Institutional Banking segment. See Note 23 Commitments and
Guarantees for further information.
(h) Represents securities held where PNC transferred to and/or services loans for a securitization SPE and we hold securities issued by that SPE.
(i) There were no gains or losses recognized on the transaction date for sales of residential mortgage and certain commercial mortgage loans as these loans are recognized on the balance
sheet at fair value. For transfers of commercial mortgage loans not recognized on the balance sheet at fair value, gains/losses recognized on sales of these loans were insignificant for
the periods presented.
(j) Includes repurchases of government insured and government guaranteed loans repurchased through the exercise of our ROAP option.

122 The PNC Financial Services Group, Inc. Form 10-K

VARIABLE INTEREST ENTITIES (VIES)
We are involved with various entities in the normal course of business that are deemed to be VIEs. We assess VIEs for
consolidation based upon the accounting policies described in Note 1 Accounting Policies. The following provides a summary of
VIEs, including those that we have consolidated and those in which we hold variable interests but have not consolidated into our
financial statements as of December 31, 2011 and December 31, 2010.

Consolidated VIEs Carrying Value (a)

December 31, 2011 Credit Card Tax Credit
In millions Market Street Securitization Trust Investments (b) Total
Assets
Cash and due from banks $ 7 $ 7
Interest-earning deposits with banks $ 317 8 325
Investment securities $ 109 109
Loans 4,163 1,933 6,096
Allowance for loan and lease losses (91) (91)
Equity investments 1,643 1,643
Other assets 360 7 838 1,205
Total assets $4,632 $2,166 $2,496 $9,294

Liabilities
Other borrowed funds $4,272 $ 287 $ 218 $4,777
Accrued expenses 50 105 155
Other liabilities 355 379 734
Total liabilities $4,627 $ 337 $ 702 $5,666

December 31, 2010 Credit Card Tax Credit

In millions Market Street Securitization Trust Investments (b) Total
Assets
Cash and due from banks $ 2 $ 2
Interest-earning deposits with banks $ 284 4 288
Investment securities $ 192 192
Loans 2,520 2,125 4,645
Allowance for loan and lease losses (183) (183)
Equity investments 1,177 1,177
Other assets 271 9 396 676
Total assets $2,983 $2,235 $1,579 $6,797

Liabilities
Other borrowed funds $2,715 $ 523 $ 116 $3,354
Accrued expenses 9 79 88
Other liabilities 268 188 456
Total liabilities $2,983 $ 532 $ 383 $3,898
(a) Amounts represent carrying value on PNCs Consolidated Balance Sheet.
(b) Amounts primarily represent Low Income Housing Tax Credit (LIHTC) investments.

The PNC Financial Services Group, Inc. Form 10-K 123

Assets and Liabilities of Consolidated VIEs (a)
Aggregate Aggregate
In millions Assets Liabilities

December 31, 2011

Market Street $5,490 $5,491
Credit Card Securitization Trust 2,175 494
Tax Credit Investments (b) 2,503 723
December 31, 2010
Market Street $3,584 $3,588
Credit Card Securitization Trust 2,269 1,004
Tax Credit Investments (b) 1,590 420
(a) Amounts in this table differ from total assets and liabilities in the preceding Consolidated VIEs Carrying Value table due to the elimination of intercompany assets and liabilities in
the preceding table.
(b) Amounts primarily represent LIHTC investments.

Non-Consolidated VIEs

PNC Carrying Carrying

Aggregate Aggregate Risk of Value of Value of
In millions Assets Liabilities Loss Assets Liabilities

December 31, 2011

Tax Credit Investments (a) $ 5,382 $ 2,384 $ 836 $ 836(c) $352(d)
Commercial Mortgage-Backed Securitizations (b) 75,961 75,961 2,079 2,079(e)
Residential Mortgage-Backed Securitizations (b) 44,315 44,315 4,667 4,667(e) 99(d)
Collateralized Debt Obligations 13 1 1(c)
Total $125,671 $122,660 $7,583 $7,583 $451

PNC Carrying Carrying

Aggregate Aggregate Risk of Value of Value of
In millions Assets Liabilities Loss Assets Liabilities

December 31, 2010

Tax Credit Investments (a) $ 4,086 $ 2,258 $ 782 $ 782(c) $301(d)
Commercial Mortgage-Backed Securitizations (b) 79,142 79,142 2,068 2,068(e)
Residential Mortgage-Backed Securitizations (b) 43,288 43,288 2,199 2,199(e) 7(d)
Collateralized Debt Obligations 18 1 1(c)
Total $126,534 $124,688 $5,050 $5,050 $308
(a) Amounts primarily represent LIHTC investments. Aggregate assets and aggregate liabilities represent estimated balances due to limited availability of financial information associated
with certain acquired partnerships.
(b) Amounts reflect involvement with securitization SPEs where PNC transferred to and/or services loans for a SPE and we hold securities issued by that SPE. Asset amounts equal
outstanding liability amounts of the SPEs due to limited availability of SPE financial information. We also invest in other mortgage and asset-backed securities issued by third-party
VIEs with which we have no continuing involvement. Further information on these securities is included in Note 7 Investment Securities and values disclosed represent our maximum
exposure to loss for those securities holdings.
(c) Included in Equity investments on our Consolidated Balance Sheet.
(d) Included in Other liabilities on our Consolidated Balance Sheet.
(e) Included in Trading securities, Investment securities, Other intangible assets, and Other assets on our Consolidated Balance Sheet.

124 The PNC Financial Services Group, Inc. Form 10-K

MARKET STREET
Market Street Funding LLC (Market Street) is a multi-seller
asset-backed commercial paper conduit that is owned by an
independent third-party. Market Streets activities primarily
involve purchasing assets or making loans secured by interests
in pools of receivables from US corporations that desire
access to the commercial paper market. Market Street funds
the purchases of assets or loans by issuing commercial paper
and is supported by pool-specific credit enhancements,
liquidity facilities and program-level credit enhancement.
Generally, Market Street mitigates its potential interest rate
risk by entering into agreements with its borrowers that reflect
interest rates based upon its weighted-average commercial
paper cost of funds. During 2011 and 2010, Market Street met
all of its funding needs through the issuance of commercial
paper.
PNC Bank, N.A. provides certain administrative services, the
program-level credit enhancement and all of the liquidity
facilities to Market Street in exchange for fees negotiated
based on market rates. Through these arrangements, PNC
Bank, N.A. has the power to direct the activities of the SPE
that most significantly affect its economic performance and
these arrangements expose PNC Bank, N.A. to expected
losses or residual returns that are significant to Market Street.
The commercial paper obligations at December 31, 2011 and
December 31, 2010 were supported by Market Streets assets.
While PNC Bank, N.A. may be obligated to fund under the
$8.3 billion of liquidity facilities for events such as
commercial paper market disruptions, borrower bankruptcies,
collateral deficiencies or covenant violations, our credit risk
under the liquidity facilities is secondary to the risk of first
loss provided by the borrower such as by the over-
collateralization of the assets or by another third-party in the
form of deal-specific credit enhancement. Deal-specific credit
enhancement that supports the commercial paper issued by
Market Street is generally structured to cover a multiple of
expected losses for the pool of assets and is sized to generally
meet rating agency standards for comparably structured
transactions. In addition, PNC Bank, N.A. would be required
to fund $1.5 billion of the liquidity facilities regardless of
whether the underlying assets are in default. Market Street
creditors have no direct recourse to PNC Bank, N.A.
PNC Bank, N.A. provides program-level credit enhancement
to cover net losses in the amount of 10% of commitments,
excluding explicitly rated AAA/Aaa facilities. PNC Bank,
N.A. provides 100% of the enhancement in the form of a cash
collateral account funded by a loan facility. This facility
expires in June 2016. At December 31, 2011, $857 million
was outstanding on this facility. This amount is eliminated in
PNCs Consolidated Balance Sheet as we consolidate Market
Street. We are not required to nor have we provided additional
financial support to the SPE.
CREDIT CARD SECURITIZATION TRUST
We are the sponsor of several credit card securitizations
facilitated through a trust. This bankruptcy-remote SPE or
VIE was established to purchase credit card receivables from
the sponsor and to issue and sell asset-backed securities
created by it to independent third-parties. The SPE was
financed primarily through the sale of these asset-backed
securities. These transactions were originally structured as a
form of liquidity and to afford favorable capital treatment. At
December 31, 2011, only Series 2007-1 issued by the SPE was
outstanding. Series 2006-1 and 2008-3 were paid off during
the first and second quarters of 2011, respectively.
Our continuing involvement in these securitization
transactions consists primarily of holding certain retained
interests and acting as the primary servicer. For the remaining
securitization series, our retained interests held are in the form
of a pro-rata undivided interest, or sellers interest, in the
transferred receivables, subordinated tranches of asset-backed
securities, interest-only strips, discount receivables, and
subordinated interests in accrued interest and fees in
securitized receivables. We have consolidated the SPE as we
are deemed the primary beneficiary of the entity based upon
our level of continuing involvement. Our role as primary
servicer gives us the power to direct the activities of the SPE
that most significantly affect its economic performance and
our holding of retained interests gives us the obligation to
absorb or receive expected losses or residual returns that are
significant to the SPE. Accordingly, all retained interests held
in the credit card SPE are eliminated in consolidation. The
underlying assets of the consolidated SPE are restricted only
for payment of the beneficial interest issued by the SPE. We
are not required to nor have we provided additional financial
support to the SPE. Additionally, creditors of the SPE have no
direct recourse to PNC.
TAX CREDIT INVESTMENTS
We make certain equity investments in various limited
partnerships or limited liability companies (LLCs) that
sponsor affordable housing projects utilizing the LIHTC
pursuant to Sections 42 and 47 of the Internal Revenue Code.
The purpose of these investments is to achieve a satisfactory
return on capital, to facilitate the sale of additional affordable
housing product offerings and to assist us in achieving goals
associated with the Community Reinvestment Act. The
primary activities of the investments include the identification,
development and operation of multi-family housing that is
leased to qualifying residential tenants. Generally, these types
of investments are funded through a combination of debt and
equity. We typically invest in these partnerships as a limited
partner or non-managing member. We make similar
investments in other types of tax credit investments.
Also, we are a national syndicator of affordable housing
equity (together with the investments described above, the
LIHTC investments). In these syndication transactions, we
create funds in which our subsidiaries are the general partner
The PNC Financial Services Group, Inc. Form 10-K 125
or managing member and sell limited partnership or
non-managing member interests to third parties, and in some
cases may also purchase a limited partnership or
non-managing member interest in the fund and/or provide
mezzanine financing to the fund. The purpose of this business
is to generate income from the syndication of these funds,
generate servicing fees by managing the funds, and earn tax
credits to reduce our tax liability. General partner or managing
member activities include selecting, evaluating, structuring,
negotiating, and closing the fund investments in operating
limited partnerships or LLCs, as well as oversight of the
ongoing operations of the fund portfolio.
Typically, the general partner or managing member will be the
party that has the right to make decisions that will most
significantly impact the economic performance of the entity.
However, certain partnership or LLC agreements provide a
single limited partner or non-managing member the ability to
remove the general partner or managing member without
cause. This results in the limited partner or non-managing
member being the party that has the right to make decisions
that will most significantly impact the economic performance
of the entity. The primary sources of losses and benefits in
LIHTC investments are the tax credits, tax benefits due to
passive losses on the investments, and development and
operating cash flows. We have consolidated LIHTC
investments in which we are the general partner or managing
member and have a limited partnership interest or
non-managing member interest that could potentially absorb
losses or receive benefits that are significant. The assets are
primarily included in Equity investments and Other assets on
our Consolidated Balance Sheet with the liabilities classified
in Other borrowed funds, Accrued expenses, and Other
liabilities and the third-party investors interests included in
the Equity section as Noncontrolling interests. Neither
creditors nor equity investors in the LIHTC investments have
any recourse to our general credit. The consolidated aggregate
assets and liabilities of these LIHTC investments are provided
in the Consolidated VIEs table and reflected in the Other
business segment.
For tax credit investments in which we do not have the right to
make decisions that will most significantly impact the
economic performance of the entity, we are not the primary
beneficiary and thus they are not consolidated. These
investments are disclosed in the Non-Consolidated VIEs table.
The table also reflects our maximum exposure to loss. Our
maximum exposure to loss is equal to our legally binding
equity commitments adjusted for recorded impairment and
partnership results. We use the equity method to account for
our investment in these entities with the investments reflected
in Equity investments on our Consolidated Balance Sheet. In
126 The PNC Financial Services Group, Inc. Form 10-K
addition, we increase our recognized investments and
recognize a liability for all legally binding unfunded equity
commitments. These liabilities are reflected in Other liabilities
on our Consolidated Balance Sheet.
RESIDENTIAL AND COMMERCIAL MORTGAGE-BACKED
SECURITIZATIONS
In connection with each Agency and Non-Agency
securitization discussed above, we evaluate each SPE utilized
in these transactions for consolidation. In performing these
assessments, we evaluate our level of continuing involvement
in these transactions as the nature of our involvement
ultimately determines whether or not we hold a variable
interest and/or are the primary beneficiary of the SPE. Factors
we consider in our consolidation assessment include the
significance of (1) our role as servicer, (2) our holdings of
mortgage-backed securities issued by the securitization SPE,
and (3) the rights of third-party variable interest holders.
Our first step in our assessment is to determine whether we
hold a variable interest in the securitization SPE. We hold a
variable interest in an Agency and Non-Agency securitization
SPE through our holding of mortgage-backed securities issued
by the SPE and/or our repurchase and recourse obligations.
Each SPE in which we hold a variable interest is evaluated to
determine whether we are the primary beneficiary of the
entity. For Agency securitization transactions, our contractual
role as servicer does not give us the power to direct the
activities that most significantly affect the economic
performance of the SPEs. Thus, we are not the primary
beneficiary of these entities. For Non-Agency securitization
transactions, we would be the primary beneficiary to the
extent our servicing activities give us the power to direct the
activities that most significantly affect the economic
performance of the SPE and we hold a more than insignificant
variable interest in the entity. At December 31, 2011, our level
of continuing involvement in Non-Agency securitization SPEs
did not result in PNC being deemed the primary beneficiary of
any of these entities. Details about the Agency and
Non-Agency securitization SPEs where we hold a variable
interest and are not the primary beneficiary are included in the
table above. Our maximum exposure to loss as a result of our
involvement with these SPEs is the carrying value of the
mortgage-backed securities, servicing assets, and servicing
advances. Creditors of the securitization SPEs have no
recourse to PNCs assets or general credit.
NOTE 4 LOANS AND COMMITMENTS TO EXTEND Net Unfunded Credit Commitments
CREDIT
December 31 December 31
Loans outstanding were as follows: In millions 2011 2010

Commercial and commercial real estate $ 64,955 $59,256

LOANS OUTSTANDING
Home equity lines of credit 18,317 19,172
December 31 December 31 Credit card 16,216 14,725
In millions 2011 2010
Other 3,783 2,652
Commercial lending
Total (a) $103,271 $95,805
Commercial $ 65,694 $ 55,177
(a) Excludes standby letters of credit. See Note 23 Commitments and Guarantees for
Commercial real estate 16,204 17,934 additional information on standby letters of credit.
Equipment lease financing 6,416 6,393
TOTAL COMMERCIAL LENDING 88,314 79,504 Commitments to extend credit represent arrangements to lend
funds or provide liquidity subject to specified contractual
Consumer lending
conditions. At December 31, 2011, commercial commitments
Home equity 33,089 34,226
reported above exclude $20.2 billion of syndications,
Residential real estate 14,469 15,999 assignments and participations, primarily to financial
Credit card 3,976 3,920 institutions. The comparable amount at December 31, 2010
Other consumer 19,166 16,946 was $16.7 billion.
TOTAL CONSUMER LENDING 70,700 71,091
Commitments generally have fixed expiration dates, may
Total loans (a) (b) $159,014 $150,595
require payment of a fee, and contain termination clauses in
(a) Net of unearned income, net deferred loan fees, unamortized discounts and
premiums, and purchase discounts and premiums totaling $2.3 billion and $2.7 the event the customers credit quality deteriorates. Based on
billion at December 31, 2011 and December 31, 2010, respectively. our historical experience, most commitments expire unfunded,
(b) Future accretable yield related to purchased impaired loans is not included in loans
and therefore cash requirements are substantially less than the
outstanding.
total commitment.
We originate interest-only loans to commercial borrowers.
This is usually to match our borrowers asset conversion to NOTE 5 ASSET QUALITY AND ALLOWANCES FOR
cash expectations (i.e., working capital lines, revolvers). LOAN AND LEASE LOSSES AND UNFUNDED LOAN
These products are standard in the financial services industry COMMITMENTS AND LETTERS OF CREDIT
and are considered during the underwriting process to mitigate
ASSET QUALITY
the increased risk that may result in borrowers not being able
We closely monitor economic conditions and loan performance
to make interest and principal payments when due. We do not
trends to manage and evaluate our exposure to credit risk. Trends
believe that these product features create a concentration of
in delinquency rates are a key indicator, among other
credit risk.
considerations, of credit risk within the loan portfolios. The
measurement of delinquency status is based on the contractual
In the normal course of business, we originate or purchase
terms of each loan. Loans that are 30 days or more past due in
loan products with contractual features, when concentrated,
terms of payment are considered delinquent. Loan delinquencies
that may increase our exposure as a holder of those loan
exclude loans held for sale and purchased impaired loans, but
products. Possible product features that may create a
include government insured or guaranteed loans.
concentration of credit risk would include a high original or
updated LTV ratio, terms that may expose the borrower to
future increases in repayments above increases in market The trends in nonperforming assets represent another key
interest rates, below-market interest rates and interest-only indicator of the potential for future credit losses.
loans, among others. We also originate home equity loans and Nonperforming assets include nonperforming loans, TDRs,
lines of credit that are concentrated in our primary geographic and other real estate owned (OREO) and foreclosed assets, but
markets. exclude government insured or guaranteed loans, loans held
for sale, loans accounted for under the fair value option and
purchased impaired loans. See Note 6 Purchased Impaired
At December 31, 2011, we pledged $21.8 billion of
Loans for further information.
commercial loans to the Federal Reserve Bank and $27.7
billion of residential real estate and other loans to the Federal
See Note 1 Accounting Policies for additional delinquency,
Home Loan Bank as collateral for the contingent ability to
nonperforming, and charge-off information.
borrow, if necessary. The comparable amounts at
December 31, 2010 were $12.6 billion and $32.4 billion,
respectively.

The PNC Financial Services Group, Inc. Form 10-K 127

The following tables display the delinquency status of our loans and our nonperforming assets at December 31, 2011 and
December 31, 2010.

Age Analysis of Past Due Accruing Loans

Accruing
Current or Less 90 Days
Than 30 Days 30-59 Days 60-89 Days Or More Total Past Nonperforming Purchased
In millions Past Due Past Due Past Due Past Due Due (a) Loans Impaired Total Loans
December 31, 2011
Commercial $ 64,437 $ 122 $ 47 $ 49 $ 218 $ 899 $ 140 $ 65,694
Commercial real estate 14,010 96 35 6 137 1,345 712 16,204
Equipment lease financing 6,367 22 5 27 22 6,416
Home equity 29,288 173 114 221 508 529 2,764 33,089
Residential real estate (b) 7,935 302 176 2,281 2,759 726 3,049 14,469
Credit card 3,857 38 25 48 111 8 3,976
Other consumer (c) 18,355 265 145 368 778 31 2 19,166
Total $144,249 $1,018 $547 $2,973 $4,538 $3,560 $6,667 $159,014
Percentage of total loans 90.72% .64% .34% 1.87% 2.85% 2.24% 4.19% 100.00%
December 31, 2010
Commercial $ 53,273 $ 251 $ 92 $ 59 $ 402 $1,253 $ 249 $ 55,177
Commercial real estate 14,713 128 62 43 233 1,835 1,153 17,934
Equipment lease financing 6,276 37 2 1 40 77 6,393
Home equity 30,334 159 91 174 424 448 3,020 34,226
Residential real estate (b) 9,150 331 225 2,121 2,677 818 3,354 15,999
Credit card 3,765 46 32 77 155 3,920
Other consumer (c) 16,312 260 101 234 595 35 4 16,946
Total $133,823 $1,212 $605 $2,709 $4,526 $4,466 $7,780 $150,595
Percentage of total loans 88.86% .81% .40% 1.80% 3.01% 2.97% 5.16% 100.00%
(a) Past due loan amounts exclude purchased impaired loans as they are considered current loans due to the accretion of interest income.
(b) Past due loan amounts at December 31, 2011, include government insured or guaranteed residential real estate mortgages, totaling $.1 billion for 30 to 59 days past due, $.1 billion for
60 to 89 days past due and $2.1 billion for 90 days or more past due. Past due loan amounts at December 31, 2010, include government insured or guaranteed residential real estate
mortgages, totaling $.1 billion for 30 to 59 days past due, $.1 billion for 60 to 89 days past due and $2.0 billion for 90 days or more past due.
(c) Past due loan amounts at December 31, 2011, include government insured or guaranteed other consumer loans, totaling $.2 billion for 30 to 59 days past due, $.1 billion for 60 to 89
days past due and $.3 billion for 90 days or more past due. Past due loan amounts at December 31, 2010, include government insured or guaranteed other consumer loans, totaling $.2
billion for 30 to 59 days past due, $.1 billion for 60 to 89 days past due and $.2 billion for 90 days or more past due.

128 The PNC Financial Services Group, Inc. Form 10-K

Nonperforming Assets
December 31, December 31,
Dollars in millions 2011 2010

Nonperforming loans
Commercial $ 899 $1,253
Commercial real estate 1,345 1,835
Equipment lease financing 22 77
TOTAL COMMERCIAL LENDING 2,266 3,165
Consumer (a)
Home equity 529 448
Residential real estate (b) 726 818
Credit card (c) 8
Other consumer 31 35
TOTAL CONSUMER LENDING 1,294 1,301
Total nonperforming loans (d) 3,560 4,466
OREO and foreclosed assets
Other real estate owned (OREO) (e) 561 589
Foreclosed and other assets 35 68
TOTAL OREO AND FORECLOSED ASSETS 596 657
Total nonperforming assets $4,156 $5,123
Nonperforming loans to total loans 2.24% 2.97%
Nonperforming assets to total loans, OREO and foreclosed assets 2.60 3.39
Nonperforming assets to total assets 1.53 1.94
Interest on nonperforming loans
Computed on original terms $ 278 $ 329
Recognized prior to nonperforming status 47 53
(a) Excludes most consumer loans and lines of credit, not secured by residential real estate, which are charged off after 120 to 180 days past due and are not placed on nonperforming
status.
(b) Effective in 2011, nonperforming residential real estate excludes loans of $61 million accounted for under the fair value option as of December 31, 2011. The comparable balance at
December 31, 2010 was not material.
(c) Effective in the second quarter 2011, the commercial nonaccrual policy was applied to certain small business credit card balances. This change resulted in loans being placed on
nonaccrual status when they become 90 days or more past due. We continue to charge off these loans at 180 days past due.
(d) Nonperforming loans do not include government insured or guaranteed loans, loans held for sale, loans accounted for under the fair value option and purchased impaired loans.
(e) Other real estate owned excludes $280 million and $178 million at December 31, 2011, and December 31, 2010, respectively, related to residential real estate that was acquired by us
upon foreclosure of serviced loans because they are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).

Nonperforming loans also include loans whose terms have
been restructured in a manner that grants a concession to a
borrower experiencing financial difficulties. In accordance
with applicable accounting guidance, these loans are
considered TDRs. See Note 1 Accounting Policies and the
TDR section of this Note 5 for additional information. For the
year ended December 31, 2011, $2.7 billion of loans held for
sale, loans accounted for under the fair value option, pooled
purchased impaired loans, as well as certain consumer
government insured or guaranteed loans which were evaluated
for TDR consideration, are not classified as TDRs.
million at December 31, 2011 and December 31, 2010,
respectively, and are excluded from nonperforming loans.
These loans have demonstrated a period of at least six months
of consecutive performance under the restructured terms. At
December 31, 2011 and December 31, 2010, remaining
commitments to lend additional funds to debtors in a
commercial or consumer TDR were immaterial.
Net interest income less the provision for credit losses was
$7.5 billion for 2011 compared with $6.7 billion for 2010 and
$5.2 billion for 2009.

Total nonperforming loans in the nonperforming assets table

above include TDRs of $1.1 billion at December 31, 2011 and
$784 million at December 31, 2010. TDRs returned to
performing (accruing) status totaled $771 million and $543

The PNC Financial Services Group, Inc. Form 10-K 129

Additional Asset Quality Indicators
We have two overall portfolio segments Commercial
Lending and Consumer Lending. Each of these two segments
is comprised of one or more loan classes. Classes are
characterized by similarities in initial measurement, risk
attributes and the manner in which we monitor and assess
credit risk. The commercial segment is comprised of the
commercial, commercial real estate, equipment lease
financing, and commercial purchased impaired loan classes.
The consumer segment is comprised of the home equity,
residential real estate, credit card, other consumer, and
consumer purchased impaired loan classes. Asset quality
indicators for each of these loan classes are discussed in more
detail below.
Commercial Loan Class
For commercial loans, we monitor the performance of the
borrower in a disciplined and regular manner based upon the
level of credit risk inherent in the loan. To evaluate the level
of credit risk, we assign an internal risk rating reflecting the
borrowers PD and LGD. This two-dimensional credit risk
rating methodology provides risk granularity in the monitoring
process on an ongoing basis. At least annually, we update PDs
based upon market data. Additionally, when statistically
significant historical data exists, we update our LGDs. The
combination of the PD and LGD ratings assigned to a
commercial loan, capturing both the combination of
expectations of default and loss severity in event of default,
reflects the relative estimated likelihood of loss for that loan at
the reporting date. Loans with better PD and LGD have the
lowest likelihood of loss. Conversely, loans with worse PD
and LGD have the highest likelihood of loss. The loss amount
also considers EAD, which we update when statistically
significant historical data exists.
Based upon the amount of the lending arrangement and our
risk rating assessment, we follow a formal schedule of written
periodic review. On a quarterly basis, we conduct formal
reviews of a markets or business units entire loan portfolio,
focusing on those loans which we perceive to be of higher
risk, based upon PDs and LGDs, or weakening credit quality.
If circumstances warrant, it is our practice to review any
customer obligation and its level of credit risk more
frequently. We attempt to proactively manage our loans by
using various procedures that are customized to the risk of a
given loan, including ongoing outreach, contact, and
assessment of obligor financial conditions, collateral
inspection and appraisal.
Commercial Real Estate Loan Class
We manage credit risk associated with our commercial real
estate projects and commercial mortgage activities similar to
commercial loans by analyzing PD and LGD. However, due to
130 The PNC Financial Services Group, Inc. Form 10-K
the nature of the collateral, for commercial real estate projects
and commercial mortgages, the LGDs tend to be significantly
lower than those seen in the commercial class. Additionally,
risks connected with commercial real estate projects and
commercial mortgage activities tend to be correlated to the
loan structure and collateral location, project progress and
business environment. As a result, these attributes are also
monitored and utilized in assessing credit risk.
As with the commercial class, a formal schedule of periodic
review is performed to also assess market/geographic risk and
business unit/industry risk. Often as a result of these
overviews, more in-depth reviews and increased scrutiny is
placed on areas of higher risk, including adverse changes in
risk ratings, deteriorating operating trends, and/or areas that
concern management. The goal of these reviews is to assess
risk and take actions to mitigate our exposure to such risks.
Equipment Lease Financing Loan Class
We manage credit risk associated with our equipment lease
financing class similar to commercial loans by analyzing PD
and LGD.
Based upon the dollar amount of the lease and of the level of
credit risk, we follow a formal schedule of periodic review.
Generally, this occurs on a quarterly basis, although we have
established practices to review such credit risk more
frequently, if circumstances warrant. Our review process
entails analysis of the following factors: equipment value/
residual value, exposure levels, jurisdiction risk, industry risk,
guarantor requirements, and regulatory compliance.
Commercial Purchased Impaired Loans Class
The credit impacts of purchased impaired loans are primarily
determined through the estimation of expected cash flows.
Commercial cash flow estimates are influenced by a number
of credit related items, which include but are not limited to:
estimated collateral values, receipt of additional collateral,
secondary trading prices, circumstances of possible and/or
ongoing liquidation, capital availability, business operations
and payment patterns.
We attempt to proactively manage these factors by using
various procedures that are customized to the risk of a given
loan. These procedures include a review by our Special Asset
Committee (SAC), ongoing outreach, contact, and assessment
of obligor financial conditions, collateral inspection and
appraisal.
See Note 6 Purchased Impaired Loans for additional
information.
Commercial Lending Asset Quality Indicators (a)
Criticized Commercial Loans
Pass Special Total
In millions Rated (b) Mention (c) Substandard (d) Doubtful (e) Loans
December 31, 2011
Commercial $60,649 $1,831 $2,817 $ 257 $65,554
Commercial real estate 11,478 791 2,823 400 15,492
Equipment lease financing 6,210 48 153 5 6,416
Purchased impaired loans 107 35 542 168 852
Total commercial lending (f) $78,444 $2,705 $6,335 $ 830 $88,314
December 31, 2010
Commercial $48,556 $1,926 $3,883 $ 563 $54,928
Commercial real estate 11,014 1,289 3,914 564 16,781
Equipment lease financing 6,121 64 162 46 6,393
Purchased impaired loans 106 35 883 378 1,402
Total commercial lending (f) $65,797 $3,314 $8,842 $1,551 $79,504
(a) Based upon PDs and LGDs.
(b) Pass Rated loans include loans not classified as Special Mention, Substandard, or Doubtful.
(c) Special Mention rated loans have a potential weakness that deserves managements close attention. If left uncorrected, these potential weaknesses may result in deterioration of
repayment prospects at some future date. These loans do not expose us to sufficient risk to warrant a more adverse classification at this time.
(d) Substandard rated loans have a well-defined weakness or weaknesses that jeopardize the collection or liquidation of debt. They are characterized by the distinct possibility that we will
sustain some loss if the deficiencies are not corrected.
(e) Doubtful rated loans possess all the inherent weaknesses of a Substandard loan with the additional characteristics that the weakness makes collection or liquidation in full improbable
due to existing facts, conditions, and values.
(f) Loans are included above based on their contractual terms as Pass, Special Mention, Substandard or Doubtful.

Home Equity and Residential Real Estate Loan Classes
We use several credit quality indicators, including
delinquency information, nonperforming loan information,
updated credit scores, originated and updated LTV ratios, and
geography, to monitor and manage credit risk within the home
equity and residential real estate loan classes. We evaluate
mortgage loan performance by source originators and loan
servicers. A summary of asset quality indicators follows:
LTV (inclusive of combined loan-to-value (CLTV) ratios for
second lien positions): At least annually, we update the
property values of real estate collateral and calculate an
updated LTV ratio. For open-end credit lines secured by real
estate in regions experiencing significant declines in property
values, more frequent valuations may occur. We examine
LTV migration and stratify LTV into categories to monitor the
risk in the loan classes.

Delinquency/Delinquency Rates: We monitor trending of

delinquency/delinquency rates for home equity and residential
real estate loans. See the Asset Quality section of this Note 5
for additional information.
Nonperforming Loans: We monitor trending of
nonperforming loans for home equity and residential real
estate loans. See the Asset Quality section of this Note 5 for
additional information.
Credit Scores: We use a national third-party provider to
update FICO credit scores for home equity loans and lines of
credit and residential real estate loans on at least a quarterly
basis. The updated scores are incorporated into a series of
credit management reports, which are utilized to monitor the
risk in the loan classes.
Historically, we used, and we continue to use, a combination of
original LTV and updated LTV for internal risk management
reporting and risk management purposes (e.g., line
management, loss mitigation strategies). In addition to the fact
that estimated property values by their nature are estimates,
given certain data limitations it is important to note that updated
LTVs may be based upon managements assumptions (e.g., if
an updated LTV is not provided by the third-party service
provider, home price index (HPI) changes will be incorporated
in arriving at managements estimate of updated LTV).
Geography: Geographic concentrations are monitored to
evaluate and manage exposures. Loan purchase programs are
sensitive to, and focused within, certain regions to manage
geographic exposures and associated risks.

The PNC Financial Services Group, Inc. Form 10-K 131

A combination of updated FICO scores, originated and Home Equity and Residential Real Estate Balances
updated LTV ratios and geographic location assigned to home
December 31 December 31
equity loans and lines of credit and residential real estate loans In millions 2011 2010
are used to monitor the risk in the loan classes. Loans with Home equity and residential real estate
higher FICO scores and lower LTVs tend to have a lower loans - excluding purchased impaired
level of risk. Conversely, loans with lower FICO scores, loans (a) $41,014 $42,298
higher LTVs, and in certain geographic locations tend to have Home equity and residential real estate
a higher level of risk. loans - purchased impaired loans (a) 6,533 7,924
Government insured or guaranteed
In the table below, we provide information on home equity residential real estate mortgages (a) 2,884 2,488
and residential real estate outstanding balances and recorded Purchase accounting, deferred fees and
investment. See Note 4 Loans and Commitments to Extend other accounting adjustments (2,873) (2,485)
Credit for additional information. Total home equity and residential real
estate loans (b) $47,558 $50,225
(a) Represents outstanding balance.
(b) Represents recorded investment.

Consumer Real Estate Secured Asset Quality Indicators Excluding Purchased Impaired Loans (a)
Residential Real
Home Equity (b) Estate (b)
December 31, 2011 in millions 1st Liens 2nd Liens 1st Liens Total (b)
Current estimated LTV ratios (c) (d)
Greater than or equal to 125% and updated FICO scores:
Greater than 660 $ 1,448 $ 3,488 $ 1,845 $ 6,781
Less than or equal to 660 (e) (f) 213 713 463 1,389
Missing FICO 494 135 289 918

Greater than or equal to 100% to less than 125% and updated FICO scores:
Greater than 660 1,017 2,864 1,336 5,217
Less than or equal to 660 (e) (f) 172 517 349 1,038
Missing FICO 186 87 53 326

Greater than or equal to 90% to less than 100% and updated FICO scores:
Greater than 660 687 1,350 760 2,797
Less than or equal to 660 111 205 200 516
Missing FICO 3 2 12 17

Less than 90% and updated FICO scores:

Greater than 660 7,190 7,888 3,152 18,230
Less than or equal to 660 1,080 1,102 799 2,981
Missing FICO 14 13 32 59

Missing LTV and updated FICO scores:

Greater than 660 9 2 11
Less than or equal to 660 2 1 3
Missing FICO 731 731
Total Home Equity and Residential Real Estate Loans $12,626 $18,367 $10,021 $41,014
(a) This table excludes purchased impaired loans of approximately $6.5 billion in outstanding balances (See the Consumer Real Estate Secured Asset Quality Indicators Purchased
Impaired Loans table below for additional information), government insured or guaranteed residential real estate mortgages of approximately $2.9 billion, and loans held for sale.
(b) Amounts shown represent outstanding balance.
(c) Based upon updated LTV (inclusive of CLTV for second lien positions).
(d) Updated LTV (inclusive of CLTV for second lien positions) are estimated using modeled property values. These ratios are updated at least annually. The related estimates and inputs
are based upon an approach that uses a combination of third-party automated valuation models (AVMs), HPI indices, property location, internal and external balance information,
origination data and management assumptions. In cases where we are in an originated second lien position, we generally utilize origination balances provided by a third-party which
do not include an amortization assumption when calculating updated LTV. Accordingly, the results of these calculations do not represent actual appraised loan level collateral or
updated LTV based upon a current first lien balance, and as such, are necessarily imprecise and subject to change as we enhance our methodology.
(e) Higher risk loans are defined as loans with both an updated FICO score of less than or equal to 660 and an updated LTV greater than or equal to 100%.
(f) The following states have the highest percentage of higher risk loans: Pennsylvania 13%, New Jersey 13%, Illinois 10%, Ohio 9%, Florida 8%, California 8%, Maryland 5%, and
Michigan 5%. The remainder of the states have lower than 3% of the high risk loans individually, and collectively they represent approximately 29% of the higher risk loans.

132 The PNC Financial Services Group, Inc. Form 10-K

Consumer Real Estate Secured Asset Quality Indicators Purchased Impaired Loans
Residential Real
Home Equity (a) (b) Estate (a) (b)
December 31, 2011 - in millions 1st Liens (c) 2nd Liens (c) 1st Liens (c) Total (a)

Current estimated LTV ratios (d) (e)

Greater than or equal to 125% and updated FICO scores:
Greater than 660 $ 21 $ 871 $ 361 $1,253
Less than or equal to 660 28 532 681 1,241
Missing FICO 24 38 62

Greater than or equal to 100% to less than 125% and updated FICO scores:
Greater than 660 19 490 229 738
Less than or equal to 660 22 272 375 669
Missing FICO 19 7 26

Greater than or equal to 90% to less than 100% and updated FICO scores:
Greater than 660 10 118 116 244
Less than or equal to 660 13 69 208 290
Missing FICO 5 4 9

Less than 90% and updated FICO scores:

Greater than 660 52 398 404 854
Less than or equal to 660 102 322 679 1,103
Missing FICO 1 16 22 39

Missing LTV and updated FICO scores:

Greater than 660 1 1
Less than or equal to 660 1 1
Missing FICO 1 2 3
Total Home Equity and Residential Real Estate Loans $268 $3,137 $3,128 $6,533
(a) Amounts shown represent outstanding balance. See Note 6 Purchased Impaired Loans for additional information.
(b) For the estimate of cash flows utilized in our purchased impaired loan accounting, other assumptions and estimates are made, including amortization of first lien balances, pre-payment
rates, etc., which are not reflected in this table.
(c) The following states have the highest percentage of loans: California 22%, Florida 13%, Illinois 12%, Ohio 9%, Michigan 5% and New York 4%. None of the remaining states have
above 3% concentration of purchased impaired, however, on a collective basis the remaining states make up 35% of the purchased impaired portfolio.
(d) Based upon updated LTV (inclusive of CLTV for second lien positions).
(e) Updated LTV (inclusive of CLTV for second lien positions) are estimated using modeled property values. These ratios are updated at least annually. The related estimates and inputs
are based upon an approach that uses a combination of third-party AVMs, HPI indices, property location, internal and external balance information, origination data and management
assumptions. In cases where we are in an originated second lien position, we generally utilize origination balances provided by a third-party which do not include an amortization
assumption when calculating updated LTV. Accordingly, the results of these calculations do not represent actual appraised loan level collateral or updated LTV based upon a current
first lien balance, and as such, are necessarily imprecise and subject to change as we enhance our methodology.

Throughout 2011 management continued to refine its process for updating LTVs, including the acquisition of additional third-party
data to determine updated LTVs. Prior to the fourth quarter 2011, updated LTV information was not readily available for a portion
of the home equity and residential real estate loan classes and, therefore, management relied on a combination of original and
updated LTVs for internal and external reporting of credit quality indicators for the home equity and residential real estate loan
classes as set forth in the 2010 Consumer Real Estate Secured Asset Quality Indicators table (the 2010 Table).

The 2011 Consumer Real Estate Secured Asset Quality Indicators Excluding Purchased Impaired Loans table (the 2011 Table)
and Consumer Real Estate Secured Asset Quality Indicators Purchased Impaired Loans table (the 2011 Purchased Impaired
Table and together with the 2011 Table, the 2011 Tables) are not directly comparable to the 2010 Table. Due to our 2011
process enhancements and availability of updated LTVs at December 31, 2011, we have defined higher risk loans in the 2011
Table based upon an updated LTV of 100% or greater, whereas higher risk loans in the 2010 Table were based a combination of
original LTV of 90% or greater and updated LTV of 90% or greater. We have also provided a separate 2011 Purchased Impaired
Table for our purchased impaired loans, whereas purchased impaired loans were included in our 2010 Table. Additionally, please
see the Home Equity and Residential Real Estate Balances table for a reconciliation of outstanding balances to recorded investment
utilized in the 2011 Tables and 2010 Table, respectively.

The PNC Financial Services Group, Inc. Form 10-K 133

Consumer Real Estate Secured Asset Quality Indicators
Home Equity and
Residential Real
Higher Risk Loans (a) All Other Loans Estate Loans
% of Total % of Total Recorded Investment
December 31, 2010 dollars in millions Amount Loans Amount Loans Amount
Home equity (b) $1,203 4% $33,023 96% $34,226
Residential real estate (c) 671 4% 15,328 96% 15,999
Total (d) $1,874 4% $48,351 96% $50,225
(a) At December 31, 2010, higher risk home equity loans are based upon updated FICO and original LTV while residential real estate higher risk loans are based upon updated FICO and
a combination of original and updated LTV. Higher risk loans exclude loans held for sale and government insured or guaranteed loans.
(b) We consider loans to be higher risk with an updated FICO of less than or equal to 660 and an original or updated LTV greater than or equal to 90%. The majority of the December 31,
2010 balance related to higher risk home equity loans is geographically distributed throughout the following areas: Pennsylvania 28%, Ohio 13%, New Jersey 11%, Illinois 7%,
Michigan 6%, and Kentucky 5%. All other states, none of which comprise more than 4%, make up the remainder of the balance.
(c) We consider loans to be higher risk with an updated FICO of less than or equal to 660 and an original or updated LTV greater than or equal to 90%. The majority of the December 31,
2010 balance related to higher risk residential real estate loans is geographically distributed throughout the following areas: California 23%, Florida 11%, Illinois 11%, and Maryland
8%. All other states, none of which comprise more than 5%, make up the remainder of the balance.
(d) Total loans include purchased impaired loans of $6.4 billion at December 31, 2010.

Credit Card and Other Consumer Loan Classes
We monitor a variety of asset quality information in the
management of the credit card and other consumer loan
classes. Other consumer loan classes include education,
automobile, and other secured and unsecured lines and loans.
Along with the trending of delinquencies and losses for each
class, FICO credit score updates are generally obtained on a
monthly basis, as well as a variety of credit bureau attributes.
Loans with high FICO scores tend to have a lower likelihood
of loss. Conversely, loans with low FICO scores tend to have
a higher likelihood of loss.
Consumer Purchased Impaired Loans Class
Estimates of the expected cash flows primarily determine the
credit impacts of consumer purchased impaired loans.
Consumer cash flow estimates are influenced by a number of
credit related items, which include, but are not limited to:
estimated real estate values, payment patterns, updated FICO
scores, the current economic environment, updated LTV ratios
and the date of origination. These key factors are monitored to
help ensure that concentrations of risk are mitigated and cash
flows are maximized.

See Note 6 Purchased Impaired Loans for additional information.

Credit Card and Other Consumer Loan Classes Asset Quality Indicators
Credit Card (a) Other Consumer (b)
% of Total Loans % of Total Loans
Using FICO Using FICO
Dollars in millions Amount Credit Metric Amount Credit Metric
December 31, 2011
FICO score greater than 719 $2,016 51% $ 5,556 61%
650 to 719 1,100 28 2,125 23
620 to 649 184 5 370 4
Less than 620 284 7 548 6
No FICO score available or required (c) 392 9 574 6
Total loans using FICO credit metric 3,976 100% 9,173 100%
Consumer loans using other internal credit metrics (b) 9,993
Total loan balance $3,976 $19,166
Weighted-average current FICO score (d) 723 739
December 31, 2010
FICO score greater than 719 $1,895 48% $ 4,135 58%
650 to 719 1,149 29 1,984 28
620 to 649 183 5 295 4
Less than 620 424 11 652 9
No FICO score available or required (c) 269 7 81 1
Total loans using FICO credit metric 3,920 100% 7,147 100%
Consumer loans using other internal credit metrics (b) 9,799
Total loan balance $3,920 $16,946
Weighted-average current FICO score (d) 709 713

134 The PNC Financial Services Group, Inc. Form 10-K

(a) At December 31, 2011, we had $49 million of credit card loans that are higher risk (i.e., loans with both updated FICO scores less than 660 and in late stage (90+ days) delinquency
status). The majority of the December 31, 2011 balance related to higher risk credit card loans is geographically distributed throughout the following areas: Ohio 20%, Michigan 14%,
Pennsylvania 13%, Illinois 7%, Indiana 7%, Florida 6%, and Kentucky 5%. All other states, none of which comprise more than 4%, make up the remainder of the balance. At
December 31, 2010, we had $70 million of credit card loans that are higher risk. The majority of the December 31, 2010 balance related to higher risk credit card loans is
geographically distributed throughout the following areas: Ohio 20%, Michigan 14%, Pennsylvania 14%, Illinois 8%, and Indiana 7%. All other states, none of which comprise more
than 5%, make up the remainder of the balance.
(b) Other consumer loans for which updated FICO scores are used as an asset quality indicator include non-government guaranteed or insured education loans, automobile loans and other
secured and unsecured lines and loans. Other consumer loans for which other internal credit metrics are used as an asset quality indicator include primarily government guaranteed or
insured education loans, as well as consumer loans to high net worth individuals. Other internal credit metrics may include delinquency status, geography or other factors.
(c) Credit card loans and other consumer loans with no FICO score available or required refers to new accounts issued to borrowers with limited credit history, accounts for which we
cannot obtain an updated FICO (e.g., recent profile changes), cards issued with a business name, and/or cards secured by collateral. Management proactively assesses the risk and size
of this loan portfolio and, when necessary, takes actions to mitigate the credit risk.
(d) Weighted-average updated FICO score excludes accounts with no FICO score available or required.

TROUBLED DEBT RESTRUCTURINGS (TDRS) The change in the recorded investments as a result of the TDR
A TDR is a loan whose terms have been restructured in a is also provided below.
manner that grants a concession to a borrower experiencing
financial difficulties. TDRs typically result from our loss Financial Impact of TDRs (a)
mitigation activities and include rate reductions, principal
During the year ended Pre-TDR Post-TDR
forgiveness, postponement/reduction of scheduled December 31, 2011 Number Recorded Recorded
amortization, and extensions, which are intended to minimize Dollars in millions of Loans Investment (b) Investment (c)

economic loss and to avoid foreclosure or repossession of Commercial lending

collateral. In those situations where principal is forgiven, the Commercial 599 $ 129 $ 112
amount of such principal forgiveness is immediately charged Commercial real estate 78 286 260
off. Equipment lease financing (d) 2 1
TOTAL COMMERCIAL
Some TDRs may not ultimately result in the full collection of LENDING 679 416 372
principal and interest, as restructured, and result in potential Consumer lending
incremental losses. These potential incremental losses have Home equity 4,013 321 320
been factored into our overall ALLL estimate. The level of Residential real estate 1,590 376 351
any subsequent defaults will likely be affected by future Credit card 12,564 92 92
economic conditions. Once a loan becomes a TDR, it will Other consumer 472 13 13
continue to be reported as a TDR until it is ultimately repaid
TOTAL CONSUMER
in full, the collateral is foreclosed upon, or it is fully charged LENDING 18,639 802 776
off. We held specific reserves in the ALLL of $580 million at Total TDRs 19,318 $1,218 $1,148
December 31, 2011 and $509 million at December 31, 2010
(a) Impact of partial charge offs at TDR date are included in this table.
for the total TDR portfolio. (b) Represents the recorded investment of the loans as of the quarter end prior to the
TDR designation, and excludes immaterial amounts of accrued interest receivable.
Summary of Troubled Debt Restructurings (c) Represents the recorded investment of the TDRs as of the quarter end the TDR
occurs, and excludes immaterial amounts of accrued interest receivable.
Dec. 31 Dec. 31 (d) Post-TDR Recorded Investment amount totaled less than $1 million.
In millions 2011 2010

Total consumer lending $1,798 $1,422 TDRs may result in charge-offs and interest income not being
Total commercial lending 405 236 recognized. At or around the time of modification, there was
Total TDRs $2,203 $1,658 approximately $26 million in recorded investment of
commercial TDRs and approximately $15 million in recorded
Nonperforming $1,141 $ 784
investment of commercial real estate TDRs charged off during
Accruing (a) 771 543 the year ended December 31, 2011. For residential real estate,
Credit card (b) 291 331 approximately $29 million in recorded investment was
Total TDRs $2,203 $1,658 charged off during the year ended December 31, 2011 related
(a) Accruing loans have demonstrated a period of at least six months of performance to modifications in which principal was partially deferred and
under the restructured terms and are excluded from nonperforming loans. deemed uncollectible. Charge offs around the time of
(b) Includes credit cards and certain small business and consumer credit agreements
modification related to home equity, credit card, and other
whose terms have been restructured and are TDRs. However, since our policy is to
exempt these loans from being placed on nonaccrual status as permitted by consumer TDR portfolios were immaterial for the period.
regulatory guidance as generally these loans are directly charged off in the period
that they become 180 days past due, these loans are excluded from nonperforming
A financial effect of rate reduction TDRs is interest income not
loans.
recognized. Interest income not recognized that otherwise
would have been earned in the year ended December 31, 2011
The table below quantifies the number of loans that were
related to both commercial TDRs and consumer TDRs is not
classified as TDRs during the year ended December 31, 2011.
material.

The PNC Financial Services Group, Inc. Form 10-K 135

The table below provides additional TDR information. The
Principal Forgiveness category includes principal forgiveness
and accrued interest forgiveness. These types of TDRs result
in a write down of the recorded investment and a charge-off if
such action has not already taken place. The Rate Reduction
TDRs category includes reduced interest rate and interest
deferral. The TDRs within this category would result in
reductions to future interest income. The Other TDR category
primarily includes postponement/reduction of scheduled
amortization, as well as contractual extensions.
In some cases, there have been multiple concessions granted
on one loan. When there have been multiple concessions
granted, the principal forgiveness TDR was prioritized for
purposes of determining the inclusion in the table below. For
example, if there is principal forgiveness in conjunction with
lower interest rate and postponement of amortization, the type
of concession will be reported as Principal Forgiveness.
Second in priority would be rate reduction. For example, if
there is an interest rate reduction in conjunction with
postponement of amortization, the type of concession will be
reported as a Rate Reduction.

TDRs by Type
Post-TDR Recorded Investment
During the year ended December 31, 2011 Principal Rate
Dollars in millions Forgiveness Reduction Other Total
Commercial lending
Commercial $ 19 $ 33 $ 60 $ 112
Commercial real estate 83 123 54 260
TOTAL COMMERCIAL LENDING (a) 102 156 114 372
Consumer lending
Home equity 281 39 320
Residential real estate 236 115 351
Credit card 92 92
Other consumer 1 12 13
TOTAL CONSUMER LENDING 610 166 776
Total TDRs $102 $766 $280 $1,148
(a) Excludes less than $1 million of Equipment lease financing in Other TDRs.

After a loan is determined to be a TDR, we continue to track
its performance under its most recent restructured terms. In
the table below, we consider a TDR to have subsequently
defaulted when it becomes 60 days past due after the most
recent date the loan was restructured. The following table
presents the recorded investment of loans that were classified
as TDRs during a 12-month period within 2010 and 2011 and
subsequently defaulted during 2011.
TDRs which have Subsequently Defaulted
During the year ended December 31, 2011 Number of
Dollars in millions Contracts
The impact to the ALLL for commercial loan TDRs is the effect
of moving to the specific reserve methodology from the
quantitative reserve methodology for those loans that were not
already put on nonaccrual status. There is an impact to the
ALLL as a result of the concession made, which generally
results in the expectation of fewer future cash flows. The
decline in expected cash flows, as well as the application of a
present value discount rate, when compared to the recorded
investment, results in a charge-off or increased ALLL.
Subsequent defaults of commercial loan TDRs do not have a
significant impact on the ALLL as these TDRs are individually
Recorded evaluated under the specific reserve methodology.
Investment

Commercial lending
For consumer TDRs the ALLL is calculated using a
Commercial 37 $ 57 discounted cash flow model, which leverages subsequent
Commercial real estate 41 136 default, prepayment, and severity rate assumptions based upon
TOTAL COMMERCIAL LENDING (a) 78 193 historically observed data. Similar to the commercial loan
Consumer lending specific reserve methodology, the reduced expected cash
flows resulting from the concessions granted impact the
Home equity 1,166 90
consumer ALLL. The decline in expected cash flows, as well
Residential real estate 421 93
as the application of a present value discount rate, when
Credit card 38,256 28 compared to the recorded investment, results in a charge-off
Other consumer 47 1 or increased ALLL.
TOTAL CONSUMER LENDING 39,890 212
Total TDRs 39,968 $405
(a) Amount for Equipment lease financing totaled less than $1 million.

136 The PNC Financial Services Group, Inc. Form 10-K

ALLOWANCES FOR LOAN AND LEASE LOSSES AND
UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
We maintain the ALLL and the Allowance for Unfunded Loan
Commitments and Letters of Credit at levels that we believe to
be appropriate to absorb estimated probable credit losses
incurred in the portfolios as of the balance sheet date. We use
the two main portfolio segments Commercial Lending and
Consumer Lending and we develop and document the ALLL
under separate methodologies for each of these segments as
further discussed and presented below.
Allowance for Loan and Lease Losses Components
For all loans, except purchased impaired loans, the ALLL is the
sum of three components: (1) asset specific/individual impaired
reserves, (2) quantitative (formulaic or pooled) reserves, and
(3) qualitative (judgmental) reserves. See Note 6 Purchased
Impaired Loans for additional ALLL information. While we
make allocations to specific loans and pools of loans, the total
reserve is available for all loan and lease losses. Although
quantitative modeling factors as discussed below are updated as
the financial strength of the borrower and overall economic
conditions change, there were no significant changes to our
ALLL methodology during 2011.
Asset Specific/Individual Component
Commercial nonperforming loans and all TDRs are
considered impaired and are allocated a specific reserve. See
Note 1 Accounting Policies for additional information.
Commercial Lending Quantitative Component
The estimates of the quantitative component of ALLL for
incurred losses within the commercial lending portfolio
segment are determined through statistical loss modeling
utilizing PD, LGD, and EAD. Based upon loan risk ratings we
assign PDs and LGDs. Each of these statistical parameters is
determined based on historical data, including market data.
PD is influenced by such factors as liquidity, industry, obligor
financial structure, access to capital, and cash flow. LGD is
influenced by collateral type, original and/or updated LTV,
and guarantees by related parties.
Consumer Lending Quantitative Component
Quantitative estimates within the consumer lending portfolio
segment are calculated using a roll-rate model based on
statistical relationships, calculated from historical data that
estimate the movement of loan outstandings through the
various stages of delinquency and ultimately charge-off.
Qualitative Component
While our reserve methodologies strive to reflect all relevant
risk factors, there continues to be uncertainty associated with,
but not limited to, potential imprecision in the estimation
process due to the inherent time lag of obtaining information
and normal variations between estimates and actual outcomes.
We provide additional reserves that are designed to provide
coverage for losses attributable to such risks. The ALLL also
includes factors which may not be directly measured in the
determination of specific or pooled reserves. Such qualitative
factors include:
Industry concentrations and conditions,
Recent credit quality trends,
Recent loss experience in particular portfolios,
Recent macro economic factors,
Changes in risk selection and underwriting standards,
and
Timing of available information.
Allowance for Purchased Impaired Loans
ALLL for purchased impaired loans is determined in
accordance with ASC 310-30 by comparing the net present
value of the cash flows expected to be collected to the
Recorded Investment for a given loan (or pool of loans). In
cases where the net present value of expected cash flows is
lower than Recorded Investment, ALLL is established. Cash
flows expected to be collected represent managements best
estimate of the cash flows expected over the life of a loan (or
pool of loans). For large balance commercial loans, cash flows
are separately estimated and compared to the Recorded
Investment at the loan level. For smaller balance pooled loans,
cash flows are estimated using cash flow models and
compared at the risk pool level, which was defined at
acquisition based on risk characteristics of the loan. Our cash
flow models use loan data including, but not limited to,
delinquency status of the loan, updated borrower FICO credit
scores, geographic information, historical loss experience, and
updated LTVs, as well as best estimates for unemployment
rates, home prices and other economic factors to determine
estimated cash flows.
The PNC Financial Services Group, Inc. Form 10-K 137
Rollforward of Allowance for Loan and Lease Losses and Associated Loan Data
Commercial Consumer
In millions Lending Lending Total

December 31, 2011

ALLOWANCE FOR LOAN AND LEASE LOSSES
January 1 $ 2,567 $ 2,320 $ 4,887
Charge-offs (1,199) (1,065) (2,264)
Recoveries 487 138 625
Net charge-offs (712) (927) (1,639)
Provision for credit losses 177 975 1,152
Net change in allowance for unfunded loan commitments and letters of credit (36) (16) (52)
Other (1) (1)
December 31 $ 1,995 $ 2,352 $ 4,347
TDRs individually evaluated for impairment $ 39 $ 541 $ 580
Other loans individually evaluated for impairment 520 520
Loans collectively evaluated for impairment 1,207 1,042 2,249
Purchased impaired loans 229 769 998
December 31 $ 1,995 $ 2,352 $ 4,347
LOAN PORTFOLIO
TDRs individually evaluated for impairment $ 405 $ 1,798 $ 2,203
Other loans individually evaluated for impairment 1,890 1,890
Loans collectively evaluated for impairment 85,167 63,087 148,254
Purchased impaired loans 852 5,815 6,667
December 31 $88,314 $70,700 $159,014
Portfolio segment ALLL as a percentage of total ALLL 45.89% 54.11% 100.00%
Ratio of the allowance for loan and lease losses to total loans 2.26% 3.33% 2.73%
December 31, 2010
ALLOWANCE FOR LOAN AND LEASE LOSSES
January 1 $ 3,345 $ 1,727 $ 5,072
Charge-offs (2,017) (1,475) (3,492)
Recoveries 427 129 556
Net charge-offs (1,590) (1,346) (2,936)
Provision for credit losses 704 1,798 2,502
Adoption of ASU 2009-17, Consolidations 141 141
Net change in allowance for unfunded loan commitments and letters of credit 108 108
December 31 $ 2,567 $ 2,320 $ 4,887
TDRs individually evaluated for impairment $ 24 $ 485 $ 509
Other loans individually evaluated for impairment 835 835
Loans collectively evaluated for impairment 1,419 1,227 2,646
Purchased impaired loans 289 608 897
December 31 $ 2,567 $ 2,320 $ 4,887
LOAN PORTFOLIO
TDRs individually evaluated for impairment $ 200 $ 1,422 $ 1,622
Other loans individually evaluated for impairment 2,888 2,888
Loans collectively evaluated for impairment 75,014 63,291 138,305
Purchased impaired loans 1,402 6,378 7,780
December 31 $79,504 $71,091 $150,595
Portfolio segment ALLL as a percentage of total ALLL 52.53% 47.47% 100.00%
Ratio of the allowance for loan and lease losses to total loans 3.23% 3.26% 3.25%

138 The PNC Financial Services Group, Inc. Form 10-K

Rollforward of Allowance for Loan and Lease Losses and Associated Loan Data
(continued from previous page)

Commercial Consumer
In millions Lending Lending Total

December 31, 2009

ALLOWANCE FOR LOAN AND LEASE LOSSES
January 1 $ 2,680 $ 1,237 $ 3,917
Charge-offs (1,935) (1,220) (3,155)
Recoveries 246 198 444
Net charge-offs (1,689) (1,022) (2,711)
Provision for credit losses 2,418 1,512 3,930
Acquired allowance National City (112) (112)
Net change in allowance for unfunded loan commitments and letters of credit 48 48
December 31 $ 3,345 $ 1,727 $ 5,072
Other loans individually evaluated for impairment $ 1,148 $ 1,148
Loans collectively evaluated for impairment 1,973 $ 1,395 3,368
Purchased impaired loans 224 332 556
December 31 $ 3,345 $ 1,727 $ 5,072
LOAN PORTFOLIO
TDRs individually evaluated for impairment (a) $ 22 $ 22
Other loans individually evaluated for impairment 3,924 3,924
Loans collectively evaluated for impairment 78,038 $65,272 143,310
Purchased impaired loans 2,167 8,120 10,287
December 31 $84,151 $73,392 $157,543
Portfolio segment ALLL as a percentage of total ALLL 65.95% 34.05% 100.00%
Ratio of the allowance for loan and lease losses to total loans 3.97% 2.35% 3.22%
(a) The associated allowance amount related to commercial lending TDRs individually evaluated for impairment totaled less than $1 million at December 31, 2009.

Impaired Loans respectively, are excluded from impaired loans pursuant to

Impaired loans include commercial nonperforming loans and
consumer and commercial TDRs, regardless of nonperforming
status. Excluded from impaired loans are nonperforming
leases, loans held for sale, smaller balance homogeneous type
loans and purchased impaired loans. See Note 6 Purchased
Impaired Loans for additional information. Nonperforming
equipment lease financing loans of $22 million and $77
million at December 31, 2011 and December 31, 2010,
authoritative lease accounting guidance. We did not recognize
any interest income on impaired loans that have not returned
to performing status, while they were impaired during 2011,
2010 or 2009. The following table provides further detail on
impaired loans individually evaluated for impairment and the
associated ALLL. Certain commercial impaired loans do not
have a related ALLL as the valuation of these impaired loans
exceeded the recorded investment.

The PNC Financial Services Group, Inc. Form 10-K 139

Impaired Loans

Unpaid Average
Principal Recorded Associated Recorded
In millions Balance Investment (a) Allowance (b) Investment (a)

December 31, 2011

Impaired loans with an associated allowance
Commercial $1,125 $ 785 $ 241 $ 979
Commercial real estate 1,452 1,043 318 1,247
Home equity 774 762 292 702
Residential real estate 853 730 193 609
Credit card 258 258 53 281
Other consumer 48 48 3 39
Total impaired loans with an associated allowance $4,510 $3,626 $1,100 $3,857
Impaired loans without an associated allowance
Commercial $ 347 $ 125 $ 104
Commercial real estate 592 342 413
Total impaired loans without an associated allowance $ 939 $ 467 $ 517
Total impaired loans $5,449 $4,093 $1,100 $4,374
December 31, 2010
Impaired loans with an associated allowance
Commercial $1,769 $1,178 $ 410 $1,533
Commercial real estate 1,927 1,446 449 1,732
Home equity 622 622 207 448
Residential real estate 521 465 122 309
Credit card 301 301 149 275
Other consumer 34 34 7 30
Total impaired loans with an associated allowance $5,174 $4,046 $1,344 $4,327
Impaired loans without an associated allowance
Commercial $ 87 $ 75 $ 90
Commercial real estate 525 389 320
Total impaired loans without an associated allowance $ 612 $ 464 $ 410
Total impaired loans $5,786 $4,510 $1,344 $4,737
(a) Recorded investment in a loan includes the unpaid principal balance plus accrued interest and net accounting adjustments, less any charge-offs. Recorded investment does not include
any associated valuation allowance. Average recorded investment is for the years ended December 31, 2011 and December 31, 2010 and is a simple average calculation using
quarter-end balances.
(b) Associated allowance amounts include $580 million and $509 million for TDRs at December 31, 2011 and December 31, 2010, respectively.

ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND NOTE 6 PURCHASED IMPAIRED LOANS
LETTERS OF CREDIT At December 31, 2008, we identified certain loans related to the
We maintain the allowance for unfunded loan commitments National City acquisition, for which there was evidence of credit
and letters of credit at a level we believe is appropriate to quality deterioration since origination and it was probable that we
absorb estimated probable credit losses on these unfunded would be unable to collect all contractually required principal and
credit facilities. See Note 1 Accounting Policies for additional interest payments. Evidence of credit quality deterioration
information. included statistics such as past due status, declines in updated
borrower FICO credit scores, geographic concentration and
Rollforward of Allowance for Unfunded Loan Commitments increases in updated LTV ratios. GAAP requires these loans to be
and Letters of Credit recorded at fair value at acquisition date and prohibits the
In millions 2011 2010 2009
carrying over or the creation of valuation allowances in the
initial accounting for such loans acquired in a transfer.
January 1 $188 $296 $344
Net change in allowance for unfunded loan GAAP allows purchasers to aggregate purchased impaired loans
commitments and letters of credit 52 (108) (48)
acquired in the same fiscal quarter into one or more pools,
December 31 $240 $188 $296 provided that the loans have common risk characteristics. A

140 The PNC Financial Services Group, Inc. Form 10-K

pool is then accounted for as a single asset with a single
composite interest rate and an aggregate expectation of cash
flows. With respect to the National City acquisition, we
aggregated homogeneous consumer and residential real estate
loans into pools with common risk characteristics. We account
for commercial and commercial real estate loans individually.
Purchased Impaired Loans
December 31, 2011 December 31, 2010
Recorded Outstanding Recorded Outstanding
In millions Investment Balance Investment
Commercial $ 140 $ 245 $ 249
Commercial real estate 712 743 1,153
Consumer 2,766 3,405 3,024
Residential real estate 3,049 3,128 3,354
Total $6,667 $7,521 $7,780
The excess of cash flows expected to be collected over the
carrying value is referred to as the accretable yield and is
recognized in interest income over the remaining life of the
loan using the constant effective yield method. The difference
between contractually required payments and the cash flows
expected to be collected is referred to as the nonaccretable
difference. Changes in the expected cash flows of individual
or pooled purchased impaired loans will either impact the
accretable yield or result in an impairment charge to the
provision for credit losses in the period in which the changes
become probable.
Subsequent decreases to the net present value of expected cash
flows will generally result in an impairment charge to the
provision for credit losses, resulting in an increase to the
ALLL, and a reclassification from accretable yield to
nonaccretable difference. Subsequent increases to the net
present value of expected cash flows will generally result in a
recapture of any previously recorded ALLL, to the extent
applicable, and/or a reclassification from nonaccretable
difference to accretable yield, which is recognized
prospectively. Other items affecting the accretable yield may
include adjustments to the expected cash flows to be collected
from contractual interest rate changes on variable rate notes,
and changes in prepayment assumptions. Interest rate
decreases for variable rate notes are treated as a reduction of
both expected and contractual cash flows such that the
nonaccretable difference is not affected. Thus, for decreases in
cash flows expected to be collected resulting from interest rate
decreases for variable rate notes, the effect will be to reduce
the yield prospectively.
Purchased impaired commercial and commercial real estate
loans are charged off when the entire customer loan balance is
Balance
deemed uncollectible. As purchased impaired consumer and
$ 408
residential real estate loans are accounted for in pools,
1,391 uncollectible amounts on individual loans remain in the pools
4,121 and are not reported as charge-offs. Disposals of loans, which
3,803 may include sales of loans or foreclosures, result in removal of
$9,723 the loan from the purchased impaired loan portfolio at its
carrying amount.
During 2011, $262 million of provision and $161 million of
charge-offs were recorded on purchased impaired loans. As of
December 31, 2011, decreases in the net present value of
expected cash flows from the date of acquisition of purchased
impaired loans resulted in an allowance for loan and lease
losses of $998 million on $6.5 billion of the purchased
impaired loans while the remaining $.2 billion of purchased
impaired loans required no allowance as net present value of
expected cash flows improved or remained the same.
Activity for the accretable yield for 2011 follows.
Accretable Yield
In millions 2011
January 1 $2,185
Accretion (including excess cash recoveries) (920)
Net reclassifications to accretable from non-accretable (a) 908
Disposals (64)
December 31 $2,109
(a) The net reclass includes the impact of improvements in the excess cash expected to
be collected from credit improvements, as well as accretable differences related to
cash flow extensions.
The PNC Financial Services Group, Inc. Form 10-K 141
NOTE 7 INVESTMENT SECURITIES
Investment Securities Summary

Amortized Unrealized Fair

In millions Cost Gains Losses Value
December 31, 2011
SECURITIES AVAILABLE FOR SALE
Debt securities
US Treasury and government agencies $ 3,369 $ 348 $ 3,717
Residential mortgage-backed
Agency 26,081 772 $ (61) 26,792
Non-agency 6,673 152 (1,268) 5,557
Commercial mortgage-backed
Agency 1,101 39 1,140
Non-agency 2,693 80 (17)2,756
Asset-backed 3,854 31 (216)3,669
State and municipal 1,779 75 (47)1,807
Other debt 2,691 83 (12)2,762
Total debt securities 48,241 1,580 (1,621)
48,200
Corporate stocks and other 368 368
Total securities available for sale $48,609 $1,580 $(1,621) $48,568
SECURITIES HELD TO MATURITY
Debt securities
US Treasury and government agencies $ 221 $ 40 $ 261
Residential mortgage-backed (agency) 4,761 131 $ (1) 4,891
Commercial mortgage-backed
Agency 1,332 50 1,382
Non-agency 3,467 108 (2) 3,573
Asset-backed 1,251 14 (3) 1,262
State and municipal 671 31 702
Other debt 363 16 379
Total securities held to maturity $12,066 $ 390 $ (6) $12,450
December 31, 2010
SECURITIES AVAILABLE FOR SALE
Debt securities
US Treasury and government agencies $ 5,575 $ 157 $ (22) $ 5,710
Residential mortgage-backed
Agency 31,697 443 (420) 31,720
Non-agency 8,193 230 (1,190) 7,233
Commercial mortgage-backed
Agency 1,763 40 (6)1,797
Non-agency 1,794 73 (11)1,856
Asset-backed 2,780 40 (238)2,582
State and municipal 1,999 30 (72)1,957
Other debt 3,992 102 (17)4,077
Total debt securities 57,793 1,115 (1,976)
56,932
Corporate stocks and other 378 378
Total securities available for sale $58,171 $1,115 $(1,976) $57,310
SECURITIES HELD TO MATURITY
Debt securities
Commercial mortgage-backed (non-agency) $ 4,316 $ 178 $ (4) $ 4,490
Asset-backed 2,626 51 (1) 2,676
Other debt 10 1 11
Total securities held to maturity $ 6,952 $ 230 $ (5) $ 7,177

142 The PNC Financial Services Group, Inc. Form 10-K

 Amortized Unrealized Fair
In millions Cost Gains Losses Value

December 31, 2009

SECURITIES AVAILABLE FOR SALE
Debt securities
US Treasury and government agencies $ 7,548 $ 20 $ (48) $ 7,520
Residential mortgage-backed
Agency 24,076 439 (77) 24,438
Non-agency 10,419 236 (2,353) 8,302
Commercial mortgage-backed
Agency 1,299 10 (12) 1,297
Non-agency 4,028 42 (222) 3,848
Asset-backed 2,019 30 (381) 1,668
State and municipal 1,346 58 (54) 1,350
Other debt 1,984 38 (7) 2,015
Total debt securities 52,719 873 (3,154) 50,438
Corporate stocks and other 360 360
Total securities available for sale $53,079 $873 $(3,154) $50,798
SECURITIES HELD TO MATURITY
Debt securities
Commercial mortgage-backed (non-agency) $ 2,030 $195 $ 2,225
Asset-backed 3,040 109 $ (13) 3,136
Other debt 159 1 160
Total securities held to maturity $ 5,229 $305 $ (13) $ 5,521

The fair value of investment securities is impacted by interest
rates, credit spreads, market volatility and liquidity conditions.
Net unrealized gains and losses in the securities available for
sale portfolio are included in shareholders equity as
accumulated other comprehensive income or loss, net of tax,
unless credit-related. Securities held to maturity are carried at
amortized cost. At December 31, 2011, accumulated other
comprehensive income included pretax gains of $98 million
from derivatives used to hedge the purchase of investment
securities classified as held to maturity. The gains will be
accreted into interest income as an adjustment of yield on the
securities.
The gross unrealized loss on debt securities held to maturity
was $6 million at December 31, 2011 and $5 million at
December 31, 2010, with $.5 billion and $.7 billion of
positions in a continuous loss position for less than 12 months
at December 31, 2011 and December 31, 2010, respectively.
The gross unrealized loss and fair value on debt securities held
to maturity that were in a continuous loss position for 12
months or more were not significant at both December 31,
2011 and December 31, 2010.
During 2011, we transferred securities with a fair value of
$6.3 billion from available for sale to held to maturity. The
securities were reclassified at fair value at the time of transfer
and represented a non-cash transaction. Accumulated other
comprehensive income included net pretax unrealized gains of
$183 million on the securities at transfer, which are being
accreted over the remaining life of the related securities as an
adjustment of yield in a manner consistent with the
amortization of the net premium on the same transferred
securities, resulting in no impact on net income.
The following table presents gross unrealized loss and fair
value of securities available for sale at December 31, 2011 and
December 31, 2010. The securities are segregated between
investments that have been in a continuous unrealized loss
position for less than twelve months and twelve months or
more based on the point in time the fair value declined below
the amortized cost basis. The table includes debt securities
where a portion of other-than-temporary impairment (OTTI)
has been recognized in accumulated other comprehensive loss.

The PNC Financial Services Group, Inc. Form 10-K 143

Gross Unrealized Loss and Fair Value of Securities Available for Sale
Unrealized loss
Unrealized loss position position 12 months
In millions less than 12 months or more Total
Unrealized Fair Unrealized Fair Unrealized Fair
Loss Value Loss Value Loss Value
December 31, 2011
Debt securities
Residential mortgage-backed
Agency $ (24) $ 2,165 $ (37) $ 408 $ (61) $ 2,573
Non-agency (26) 273 (1,242) 4,378 (1,268) 4,651
Commercial mortgage-backed
Agency
Non-agency (17) 483 (17) 483
Asset-backed (13) 1,355 (203) 764 (216) 2,119
State and municipal (6) 512 (41) 318 (47) 830
Other debt (5) 240 (7) 289 (12) 529
Total $ (91) $ 5,028 $(1,530) $6,157 $(1,621) $11,185
December 31, 2010
Debt securities
US Treasury and government agencies $ (22) $ 398 $ (22) $ 398
Residential mortgage-backed
Agency (406) 17,040 $ (14) $ 186 (420) 17,226
Non-agency (17) 345 (1,173) 5,707 (1,190) 6,052
Commercial mortgage-backed
Agency (6) 344 (6) 344
Non-agency (8) 184 (3) 84 (11) 268
Asset-backed (5) 441 (233) 776 (238) 1,217
State and municipal (22) 931 (50) 247 (72) 1,178
Other debt (14) 701 (3) 13 (17) 714
Total $(500) $20,384 $(1,476) $7,013 $(1,976) $27,397

EVALUATING INVESTMENT SECURITIES FOR OTHER-THAN-
TEMPORARY IMPAIRMENTS
For the securities in the preceding table, as of December 31,
2011 we do not intend to sell and believe we will not be
required to sell the securities prior to recovery of the
amortized cost basis.
On at least a quarterly basis, we conduct a comprehensive
security-level assessment on all securities in an unrealized loss
position to determine if OTTI exists. An unrealized loss exists
when the current fair value of an individual security is less
than its amortized cost basis. An OTTI loss must be
recognized for a debt security in an unrealized loss position if
we intend to sell the security or it is more likely than not we
will be required to sell the security prior to recovery of its
amortized cost basis. In this situation, the amount of loss
recognized in income is equal to the difference between the
fair value and the amortized cost basis of the security. Even if
we do not expect to sell the security, we must evaluate the
expected cash flows to be received to determine if we believe
a credit loss has occurred. In the event of a credit loss, only
the amount of impairment associated with the credit loss is
recognized in income. The portion of the unrealized loss
relating to other factors, such as liquidity conditions in the
market or changes in market interest rates, is recorded in
accumulated other comprehensive loss.
The security-level assessment is performed on each security,
regardless of the classification of the security as available for
sale or held to maturity. Our assessment considers the security
structure, recent security collateral performance metrics if
applicable, external credit ratings, failure of the issuer to make
scheduled interest or principal payments, our judgment and
expectations of future performance, and relevant independent
industry research, analysis and forecasts. We also consider the
severity of the impairment in our assessment. Results of the
periodic assessment are reviewed by a cross-functional senior
management team representing Asset & Liability
Management, Finance, and Market Risk Management. The
senior management team considers the results of the
assessments, as well as other factors, in determining whether
the impairment is other-than-temporary.

144 The PNC Financial Services Group, Inc. Form 10-K

For debt securities, a critical component of the evaluation for The following table provides detail on the significant
OTTI is the identification of credit-impaired securities, where assumptions used to determine credit impairment for
management does not expect to receive cash flows sufficient non-agency residential mortgage-backed and asset-backed
to recover the entire amortized cost basis of the security. The securities:
paragraphs below describe our process for identifying credit
impairment for our most significant categories of securities Credit Impairment Assessment Assumptions Non-Agency
not backed by the US government or its agencies. Residential Mortgage-Backed and Asset-Backed
Securities (a)
Non-Agency Residential Mortgage-Backed Securities and
Weighted-
Asset-Backed Securities Collateralized by First-Lien and December 31, 2011 Range average (b)
Second-Lien Residential Mortgage Loans Long-term prepayment rate (annual CPR)
Potential credit losses on these securities are evaluated on a
Prime 7-20% 14%
security by security basis. Collateral performance assumptions
are developed for each security after reviewing collateral Alt-A 5-12 6
composition and collateral performance statistics. This Option ARM 3-6 3
includes analyzing recent delinquency roll rates, loss Remaining collateral expected to default
severities, voluntary prepayments, and various other collateral Prime 1-49% 19%
and performance metrics. This information is then combined Alt-A 1-59 34
with general expectations on the housing market and other
Option ARM 16-81 61
economic factors to develop estimates of future performance.
Loss severity
Security level assumptions for prepayments, loan defaults, and Prime 5-70% 46%
loss given default are applied to every security using a third- Alt-A 18-82 57
party cash flow model. The third-party cash flow model then Option ARM 41-69 58
generates projected cash flows according to the structure of (a) Collateralized by first and second-lien non-agency residential mortgage loans.
each security. Based on the results of the cash flow analysis, (b) Calculated by weighting the relevant assumption for each individual security by the
we determine whether we will recover the amortized cost current outstanding cost basis of the security.
basis of our security.
Non-Agency Commercial Mortgage-Backed Securities
Credit losses on these securities are measured using property-
level cash flow projections and forward-looking property
valuations. Cash flows are projected using a detailed analysis
of net operating income (NOI) by property type which, in turn,
is based on the analysis of NOI performance over the past
several business cycles combined with PNCs economic
outlook. Loss severities are based on property price
projections, which are calculated using capitalization rate
projections. The capitalization rate projections are based on a
combination of historical capitalization rates and expected
capitalization rates implied by current market activity, our
outlook and relevant independent industry research, analysis
and forecasts. Securities exhibiting weaker performance
within the model are subject to further analysis. This analysis
is performed at the loan level, and includes assessing local
market conditions, reserves, occupancy, rent rolls and master/
special servicer details.

The PNC Financial Services Group, Inc. Form 10-K 145

During 2011 and 2010, the OTTI credit losses recognized in noninterest income related to estimated credit losses on securities that
we do not expect to sell were as follows:

Summary of OTTI Credit Losses Recognized in Earnings

Year ended December 31
In millions 2011 2010

Available for sale securities:

Non-agency residential mortgage-backed $(130) $(242)
Non-agency commercial mortgage-backed (5)
Asset-backed (21) (78)
Other debt (1)
Total $(152) $(325)

Summary of OTTI Noncredit Losses Included in Accumulated Other Comprehensive Loss

In millions 2011 2010

Total $(268) $(283)

The following table presents a rollforward of the cumulative OTTI credit losses recognized in earnings for all debt securities for
which a portion of an OTTI loss was recognized in accumulated other comprehensive loss:

Rollforward of Cumulative OTTI Credit Losses Recognized in Earnings

Non-agency Non-agency
residential commercial Asset- Other
In millions mortgage-backed mortgage-backed backed debt Total

December 31, 2009 (a) $(479) $(6) $(145) $(12) $ (642)

Loss where impairment was not previously recognized (44) (3) (17) (64)
Additional loss where credit impairment was previously recognized (198) (2) (61) (261)
Reduction due to credit impaired securities sold 12 12
December 31, 2010 (709) (11) (223) (12) (955)
Loss where impairment was not previously recognized (18) (3) (1) (22)
Additional loss where credit impairment was previously recognized (112) (18) (130)
Reduction due to credit impaired securities sold 11 5 16
December 31, 2011 $(828) $(6) $(244) $(13) $(1,091)
(a) Excludes OTTI credit losses related to equity securities totaling $4 million.

Information relating to gross realized securities gains and losses from the sales of securities is set forth in the following table.

Gains (Losses) on Sales of Securities Available for Sale

Gross Gross Tax

In millions Proceeds Gains Losses Net Gains Expense

For the year ended December 31

2011 $21,039 $406 $157 $249 $87
2010 23,783 490 64 426 149
2009 18,901 570 20 550 192

146 The PNC Financial Services Group, Inc. Form 10-K

The following table presents, by remaining contractual maturity, the amortized cost, fair value and weighted-average yield of debt
securities at December 31, 2011.

Contractual Maturity of Debt Securities

After 1 Year
December 31, 2011 1 Year or through 5 After 5 Years After 10
Dollars in millions Less Years through 10 Years Years Total
SECURITIES AVAILABLE FOR SALE
US Treasury and government agencies $2,134 $ 835 $ 400 $ 3,369
Residential mortgage-backed
Agency 29 840 25,212 26,081
Non-agency 28 6,645 6,673
Commercial mortgage-backed
Agency 740 361 1,101
Non-agency $ 27 183 49 2,434 2,693
Asset-backed 68 772 627 2,387 3,854
State and municipal 17 68 293 1,401 1,779
Other debt 292 1,322 601 476 2,691
Total debt securities available for sale $ 404 $5,248 $3,634 $38,955 $48,241
Fair value $ 407 $5,401 $3,860 $38,532 $48,200
Weighted-average yield, GAAP basis 2.62% 2.83% 3.35% 3.69% 3.56%
SECURITIES HELD TO MATURITY
US Treasury and government agencies $ 221 $ 221
Residential mortgage-backed (agency) 4,761 4,761
Commercial mortgage-backed
Agency $ 162 $1,164 6 1,332
Non-agency 89 3,378 3,467
Asset-backed $ 7 794 98 352 1,251
State and municipal 8 46 127 490 671
Other debt 2 361 363
Total debt securities held to maturity $ 15 $1,093 $1,750 $ 9,208 $12,066
Fair value $ 15 $1,109 $1,820 $ 9,506 $12,450
Weighted-average yield, GAAP basis 2.86% 2.49% 3.29% 4.44% 4.09%

Based on current interest rates and expected prepayment speeds, the weighted-average expected maturity of mortgage and other
asset-backed debt securities were as follows as of December 31, 2011:

Weighted-Average Expected Maturity of Mortgage and Other Asset-Backed Debt Securities

December 31
2011
Agency residential mortgage-backed securities 3.3 years
Non-agency residential mortgage-backed securities 4.7 years
Agency commercial mortgage-backed securities 5.4 years
Non-agency commercial mortgage-backed securities 2.6 years
Asset-backed securities 3.2 years

Weighted-average yields are based on historical cost with effective yields weighted for the contractual maturity of each security. At
December 31, 2011, there were no securities of a single issuer, other than FNMA and FHLMC, which exceeded 10% of total
shareholders equity.

The PNC Financial Services Group, Inc. Form 10-K 147

The following table presents the fair value of securities that
have been either pledged to or accepted from others to
collateralize outstanding borrowings.
Fair Value of Securities Pledged and Accepted as Collateral
December 31 December 31
In millions 2011
Pledged to others $20,109 $27,985
Accepted from others:
Permitted by contract or custom
to sell or repledge 1,796
Permitted amount repledged to others 892
The securities pledged to others include positions held in our
portfolio of investment securities, trading securities, and
securities accepted as collateral from others that we are
permitted by contract or custom to sell or repledge, and were
used to secure public and trust deposits, repurchase
agreements, and for other purposes. The securities accepted
from others that we are permitted by contract or custom to sell
or repledge are a component of Federal funds sold and resale
agreements on our Consolidated Balance Sheet.
NOTE 8 FAIR VALUE
FAIR VALUE MEASUREMENT
Fair value is defined in GAAP as the price that would be
received to sell an asset or the price paid to transfer a liability
on the measurement date. The standard focuses on the exit
price in the principal or most advantageous market for the
asset or liability in an orderly transaction between market
participants. GAAP establishes a fair value reporting
hierarchy to maximize the use of observable inputs when
measuring fair value and defines the three levels of inputs as
noted below.
Level 1
Quoted prices in active markets for identical assets or
liabilities. Level 1 assets and liabilities may include debt
securities, equity securities and listed derivative contracts that
are traded in an active exchange market and certain US
Treasury securities that are actively traded in over-the-counter
markets.
Level 2
Observable inputs other than Level 1 such as: quoted prices
for similar assets or liabilities in active markets, quoted prices
for identical or similar assets or liabilities in markets that are
not active, or other inputs that are observable or can be
corroborated to observable market data for substantially the
full term of the asset or liability. Level 2 assets and liabilities
may include debt securities, equity securities and listed
derivative contracts with quoted prices that are traded in
markets that are not active, and certain debt and equity
148 The PNC Financial Services Group, Inc. Form 10-K
securities and over-the-counter derivative contracts whose fair
value is determined using a pricing model without significant
unobservable inputs. This category generally includes US
government agency debt securities, agency residential and
commercial mortgage-backed debt securities, asset-backed
debt securities, corporate debt securities, residential mortgage
2010 loans held for sale, and derivative contracts.
Level 3
Unobservable inputs that are supported by minimal or no
market activity and that are significant to the fair value of the
3,529
assets or liabilities. Level 3 assets and liabilities may include
1,971 financial instruments whose value is determined using pricing
models with internally developed assumptions, discounted
cash flow methodologies, or similar techniques, as well as
instruments for which the determination of fair value requires
significant management judgment or estimation. This category
generally includes certain available for sale and trading
securities, commercial mortgage loans held for sale, private
equity investments, residential mortgage servicing rights,
BlackRock Series C Preferred Stock and certain financial
derivative contracts. The available for sale and trading
securities within Level 3 include non-agency residential
mortgage-backed securities, auction rate securities, private-
issuer asset-backed securities and corporate debt securities.
Nonrecurring items, primarily certain nonaccrual and other
loans held for sale, commercial mortgage servicing rights,
equity investments, OREO and foreclosed assets and other
assets are also included in this category.
We characterize active markets as those where transaction
volumes are sufficient to provide objective pricing
information, with reasonably narrow bid/ask spreads and
where dealer quotes received do not vary widely and are based
on current information. Inactive markets are typically
characterized by low transaction volumes, price quotations
that vary substantially among market participants or are not
based on current information, wide bid/ask spreads, a
significant increase in implied liquidity risk premiums, yields,
or performance indicators for observed transactions or quoted
prices compared to historical periods, a significant decline or
absence of a market for new issuance, or any combination of
the above factors. We also consider nonperformance risks
including credit risk as part of our valuation methodology for
all assets and liabilities measured at fair value.
Any internal models used to determine fair values or to
validate dealer quotes based on the descriptions below are
subject to review and independent testing as part of our model
validation and internal control testing processes. The Model
Validation Group (MVG) tests significant models on at least
an annual basis. In addition, we have teams, independent of
the traders, verify marks and assumptions used for valuations
at each period end.
FINANCIAL INSTRUMENTS ACCOUNTED FOR AT FAIR VALUE cases, the securities are classified as Level 3. As of
ON ARECURRING BASIS December 31, 2011 and 2010, securities classified as Level 3
consisted primarily of non-agency residential mortgage-
Securities Available for Sale and Trading Securities
backed and asset-backed securities collateralized by first- and
Securities accounted for at fair value include both the
second-lien residential mortgage loans. Fair value for these
available for sale and trading portfolios. We primarily use
securities is estimated primarily using pricing obtained from
prices obtained from pricing services, dealer quotes, or recent
third-party vendors. In some cases, fair value is estimated
trades to determine the fair value of securities. As of
using a dealer quote or by reference to prices of securities of a
December 31, 2011, 86% of the positions in these portfolios
similar vintage and collateral type. Market activity for these
were priced by pricing services provided by third-party
security types is limited with little price transparency. As a
vendors. The third-party vendors use a variety of methods
result, these securities are generally valued by the third-party
when pricing securities that incorporate relevant market data
vendor using a discounted cash flow approach that
to arrive at an estimate of what a buyer in the marketplace
incorporates observable market activity where available.
would pay for a security under current market conditions. One
Significant inputs to the valuation include prepayment
of the vendors prices are set with reference to market activity
projections, credit loss assumptions, and discount rates that
for highly liquid assets such as U.S. Treasury and agency
are deemed representative of current market conditions.
securities and agency residential mortgage-backed securities,
and matrix pricing for other asset classes, such as commercial
A cross-functional team comprised of representatives from
mortgage and other asset-backed securities. Another vendor
Asset & Liability Management, Finance, and Market Risk
primarily uses pricing models considering adjustments for
Management oversees the governance of the processes and
ratings, spreads, matrix pricing and prepayments for the
methodologies used to estimate the fair value of securities and
instruments we value using this service, such as non-agency
the price validation testing that is performed. Management
residential mortgage-backed securities, agency adjustable rate
meets on a regular basis to review pricing sources and trends
mortgage securities, agency collateralized mortgage
and the results of validation testing.
obligations (CMOs), commercial mortgage-backed securities
and municipal bonds. The vendors we use provide pricing
Financial Derivatives
services on a global basis and have quality management
Exchange-traded derivatives are valued using quoted market
processes in place to monitor the integrity of the valuation
prices and are classified as Level 1. However, the majority of
inputs and the prices provided to users, including procedures
derivatives that we enter into are executed over-the-counter
to consider and incorporate information received from pricing
and are valued using internal models. Readily observable
servicer users who may challenge a price. We monitor and
market inputs to these models can be validated to external
validate the reliability of vendor pricing on an ongoing basis
sources, including industry pricing services, or corroborated
through periodic pricing methodology reviews, by performing
through recent trades, dealer quotes, yield curves, implied
detailed reviews of the assumptions and inputs used by the
volatility or other market-related data. Certain derivatives,
vendor to price individual securities, and through price
such as total rate of return swaps, are corroborated to the
validation testing. Price validation testing is performed
CMBX index. These derivatives are classified as Level 2.
independent of the risk-taking function and involves
Derivatives priced using significant management judgment or
corroborating the prices received from third-party vendors
assumptions are classified as Level 3.
with prices from another third-party source, by reviewing
valuations of comparable instruments, or by comparison to
The fair values of our derivatives are adjusted for
internal valuations. Securities not priced by one of our pricing
nonperformance risk including credit risk as appropriate. Our
vendors may be valued using a dealer quote. Dealer quotes
nonperformance risk adjustment is computed using new loan
received are typically non-binding. Securities priced using a
pricing and considers externally available bond spreads, in
dealer quote are subject to corroboration either with another
conjunction with internal historical recovery observations.
dealer quote, by comparison to similar securities priced by
another third-party source, or through internal valuation in
Residential Mortgage Loans Held for Sale
order to validate that the quote is representative of the market.
We have elected to account for certain residential mortgage
Security prices are also validated through actual cash
loans originated for sale on a recurring basis at fair value.
settlement upon sale of a security.
Residential mortgage loans are valued based on quoted market
prices, where available, prices for other traded mortgage loans
Securities are classified within the fair value hierarchy after
with similar characteristics, and purchase commitments and
giving consideration to the nature and complexity of the
bid information received from market participants. These
security, the activity level in the market for the security type,
loans are regularly traded in active markets and observable
and the observability of the inputs used to determine the fair
pricing information is available from market participants. The
value. In circumstances where relevant market prices are
prices are adjusted as necessary to include the embedded
limited or unavailable, valuations may require significant
servicing value in the loans and to take into consideration the
judgments or adjustments to determine fair value. In these
specific characteristics of certain loans that are priced based

The PNC Financial Services Group, Inc. Form 10-K 149

on the pricing of similar loans. These adjustments represent
unobservable inputs to the valuation but are not considered
significant to the fair value of the loans. Accordingly,
residential mortgage loans held for sale are classified as
Level 2.
Residential Mortgage Servicing Rights
Residential mortgage servicing rights (MSRs) are carried at
fair value on a recurring basis. Assumptions incorporated into
the residential MSRs valuation model reflect managements
best estimate of factors that a market participant would use in
valuing the residential MSRs. Although sales of residential
MSRs do occur, residential MSRs do not trade in an active,
open market with readily observable prices so the precise
terms and conditions of sales are not available. As a
benchmark for the reasonableness of its residential MSRs fair
value, PNC obtains opinions of value from independent
parties (brokers). These brokers provided a range (+/- 10
bps) based upon their own discounted cash flow calculations
of our portfolio that reflected conditions in the secondary
market, and any recently executed servicing transactions. PNC
compares its internally-developed residential MSRs value to
the ranges of values received from the brokers. If our
residential MSRs fair value falls outside of the brokers
ranges, management will assess whether a valuation
adjustment is warranted. For 2011 and 2010, PNCs
residential MSRs value has not fallen outside of the brokers
ranges. We consider our residential MSRs value to represent a
reasonable estimate of fair value. Due to the nature of the
valuation inputs, residential MSRs are classified as Level 3.
Commercial Mortgage Loans Held for Sale
We account for certain commercial mortgage loans classified
as held for sale at fair value. The election of the fair value
option aligns the accounting for the commercial mortgages
with the related hedges.
We determine the fair value of commercial mortgage loans
held for sale by using a whole loan methodology. Fair value is
determined using sale valuation assumptions that management
believes a market participant would use in pricing the loans.
When available, valuation assumptions included observable
inputs based on whole loan sales. Adjustments are made to
these assumptions to account for situations when uncertainties
exist, including market conditions and liquidity. Credit risk is
included as part of our valuation process for these loans by
considering expected rates of return for market participants for
similar loans in the marketplace. Based on the significance of
unobservable inputs, we classified this portfolio as Level 3.
150 The PNC Financial Services Group, Inc. Form 10-K
Equity Investments
The valuation of direct and indirect private equity investments
requires significant management judgment due to the absence
of quoted market prices, inherent lack of liquidity and the
long-term nature of such investments. The carrying values of
direct and affiliated partnership interests reflect the expected
exit price and are based on various techniques including
multiples of adjusted earnings of the entity, independent
appraisals, anticipated financing and sale transactions with
third parties, or the pricing used to value the entity in a recent
financing transaction. We value indirect investments in private
equity funds based on net asset value as provided in the
financial statements that we receive from their managers. Due
to the time lag in our receipt of the financial information and
based on a review of investments and valuation techniques
applied, adjustments to the manager-provided value are made
when available recent portfolio company information or
market information indicates a significant change in value
from that provided by the manager of the fund. These
investments are classified as Level 3.
Customer Resale Agreements
We have elected to account for resale agreements, which are
economically hedged using free-standing financial derivatives,
at fair value. The fair value for resale agreements is
determined using a model that includes observable market
data such as interest rates as inputs. Readily observable
market inputs to this model can be validated to external
sources, including yield curves, implied volatility or other
market-related data. These instruments are classified as Level
2.
BlackRock Series C Preferred Stock
We have elected to account for the shares of BlackRock Series
C Preferred Stock received in a stock exchange with
BlackRock at fair value. We own approximately 1.5 million of
these shares after delivery of approximately 1.3 million shares
in September 2011 pursuant to our obligation to partially fund
a portion of certain BlackRock LTIP programs. The Series C
Preferred Stock economically hedges the BlackRock LTIP
liability that is accounted for as a derivative. The fair value of
the Series C Preferred Stock is determined using a third-party
modeling approach, which includes both observable and
unobservable inputs. This approach considers expectations of
a default/liquidation event and the use of liquidity discounts
based on our inability to sell the security at a fair, open market
price in a timely manner. Although dividends are equal to
common shares and other preferred series, significant transfer
restrictions exist on our Series C shares for any purpose other
than to satisfy the LTIP obligation. Due to the significance of
unobservable inputs, this security is classified as Level 3.
Assets and liabilities measured at fair value on a recurring basis, including instruments for which PNC has elected the fair value
option, follow.

Fair Value Measurements Summary

December 31, 2011 December 31, 2010
Total Fair Total Fair
In millions Level 1 Level 2 Level 3 Value Level 1 Level 2 Level 3 Value
Assets
Securities available for sale
US Treasury and government agencies $1,659 $ 2,058 $ 3,717 $5,289 $ 421 $ 5,710
Residential mortgage-backed
Agency 26,792 26,792 31,720 31,720
Non-agency $ 5,557 5,557 $ 7,233 7,233
Commercial mortgage-backed
Agency 1,140 1,140 1,797 1,797
Non-agency 2,756 2,756 1,856 1,856
Asset-backed 2,882 787 3,669 1,537 1,045 2,582
State and municipal 1,471 336 1,807 1,729 228 1,957
Other debt 2,713 49 2,762 4,004 73 4,077
Total debt securities 1,659 39,812 6,729 48,200 5,289 43,064 8,579 56,932
Corporate stocks and other 368 368 307 67 4 378
Total securities available for sale 2,027 39,812 6,729 48,568 5,596 43,131 8,583 57,310
Financial derivatives (a) (b)
Interest rate contracts 9,150 60 9,210 5,502 68 5,570
Other contracts 246 7 253 178 9 187
Total financial derivatives 9,396 67 9,463 5,680 77 5,757
Residential mortgage loans held for sale (c) 1,522 1,522 1,878 1,878
Trading securities (d)
Debt (e) (f) 1,058 1,371 39 2,468 1,348 367 69 1,784
Equity 42 3 45 42 42
Total trading securities 1,100 1,374 39 2,513 1,390 367 69 1,826
Residential mortgage servicing rights (g) 647 647 1,033 1,033
Commercial mortgage loans held for sale (c) 843 843 877 877
Equity investments
Direct investments 856 856 749 749
Indirect investments (h) 648 648 635 635
Total equity investments 1,504 1,504 1,384 1,384
Customer resale agreements (i) 732 732 866 866
Loans (j) 222 5 227 114 2 116
Other assets
BlackRock Series C Preferred Stock (k) 210 210 396 396
Other 422 7 429 450 7 457
Total other assets 422 217 639 450 403 853
Total assets $3,127 $53,480 $10,051 $66,658 $6,986 $52,486 $12,428 $71,900
Liabilities
Financial derivatives (b) (l)
Interest rate contracts $ 7,065 $ 6 $ 7,071 $ 4,302 $ 56 $ 4,358
BlackRock LTIP 210 210 396 396
Other contracts 233 92 325 173 8 181
Total financial derivatives 7,298 308 7,606 4,475 460 4,935
Trading securities sold short (m)
Debt (e) $ 997 19 1,016 $2,514 16 2,530
Total trading securities sold short 997 19 1,016 2,514 16 2,530
Other liabilities 3 3 6 6
Total liabilities $ 997 $ 7,320 $ 308 $ 8,625 $2,514 $ 4,497 $ 460 $ 7,471

The PNC Financial Services Group, Inc. Form 10-K 151

(a) Included in Other assets on our Consolidated Balance Sheet.
(b) Amounts at December 31, 2011 and December 31, 2010 are presented gross and are not reduced by the impact of legally enforceable master netting agreements that allow PNC to net
positive and negative positions and cash collateral held or placed with the same counterparty. At December 31, 2011 and December 31, 2010, respectively, the net asset amounts were
$2.4 billion and $1.9 billion and the net liability amounts were $.7 billion and $1.1 billion.
(c) Included in Loans held for sale on our Consolidated Balance Sheet. PNC has elected the fair value option for certain commercial and residential mortgage loans held for sale.
(d) Fair value includes net unrealized gains of $102 million at December 31, 2011 compared with net unrealized losses of $17 million at December 31, 2010.
(e) Approximately 57% of these securities are residential mortgage-backed securities and 34% are US Treasury and government agencies securities at December 31, 2011. Comparable
amounts at December 31, 2010 were 4% and 74%, respectively.
(f) At December 31, 2011, $1.1 billion of residential mortgage-backed agency securities with embedded derivatives were carried in Trading securities.
(g) Included in Other intangible assets on our Consolidated Balance Sheet.
(h) The indirect equity funds are not redeemable, but PNC receives distributions over the life of the partnership from liquidation of the underlying investments by the investee.
(i) Included in Federal funds sold and resale agreements on our Consolidated Balance Sheet. PNC has elected the fair value option for these items.
(j) Included in Loans on our Consolidated Balance Sheet.
(k) PNC has elected the fair value option for these shares.
(l) Included in Other liabilities on our Consolidated Balance Sheet.
(m) Included in Other borrowed funds on our Consolidated Balance Sheet.

Reconciliations of assets and liabilities measured at fair value on a recurring basis using Level 3 inputs for 2011 and 2010 follow.

Year Ended December 31, 2011

(*) Unrealized
gains (losses) on
Total realized / unrealized assets and
gains (losses) for the period (a) liabilities held on
Included in Consolidated
Fair Value other Transfers Fair Value Balance Sheet at
Level 3 Instruments Only Dec. 31, Included in comprehensive out of December 31, December 31,
In millions 2010 Earnings (*) income Purchases Sales Issuances Settlements Level 3 (b) 2011 2011
Assets
Securities available for sale
Residential mortgage-
backed non-agency $ 7,233 $(80) $(157) $ 45 $(280) $(1,204) $ 5,557 $(130)
Asset-backed 1,045 (11) 21 48 (316) 787 (21)
State and municipal 228 10 121 (23) 336
Other debt 73 (2) 3 3 (3) 1 $(26) 49 (1)
Corporate stocks and
other 4 (4)
Total securities
available for sale 8,583 (93) (123) 217 (283) (1,546) (26) 6,729 (152)
Financial derivatives 77 263 5 (278) 67 188
Trading securities Debt 69 4 (29) (5) 39 (5)
Residential mortgage
servicing rights 1,033 (406) 65 $118 (163) 647 (383)
Commercial mortgage
loans held for sale 877 3 (13) (24) 843 (4)
Equity investments
Direct investments 749 87 176 (156) 856 58
Indirect investments 635 89 66 (142) 648 91
Total equity
investments 1,384 176 242 (298) 1,504 149
Loans 2 4 (1) 5
Other assets
BlackRock Series C
Preferred Stock 396 (14) (172) 210 (14)
Other 7 1 (1) 7
Total other assets 403 (14) 1 (173) 217 (14)
Total assets $12,428 $(67) $(123) $534 $(594) $118 $(2,214) $(31) $10,051 $(221)
Total liabilities (c) $ 460 $ 7 $ 10 $ (169) $ 308 $ (17)

152 The PNC Financial Services Group, Inc. Form 10-K

Year Ended December 31, 2010
(*) Unrealized
gains (losses) on
Total realized / unrealized assets and
gains (losses) for the period (a) Purchases, liabilities held on
Included in issuances, Consolidated
Fair Value other and Transfers Transfers Fair Value Balance Sheet at
Level 3 Instruments Only December 31, Included in comprehensive settlements, into out of December 31, December 31,
In millions 2009 Earnings (*) income net Level 3 (b) Level 3 (b) 2010 2010
Assets
Securities available for sale
Residential mortgage-backed agency $ 5 $ (5)
Residential mortgage-backed
non-agency 8,302 $(116) $1,065 (2,016) $ (2) $ 7,233 $(241)
Commercial mortgage-backed
non-agency 6 $ 2 (8)
Asset-backed 1,254 (77) 180 (312) 1,045 (78)
State and municipal 266 5 (24) (20) 1 228
Other debt 53 6 (15) 29 73
Corporate stocks and other 47 (1) (42) 4
Total securities available for sale 9,933 (188) 1,226 (2,410) 32 (10) 8,583 (319)
Financial derivatives 50 36 (10) 1 77 43
Trading securities Debt 89 (2) (18) 69 (4)
Residential mortgage servicing rights 1,332 (209) (90) 1,033 (194)
Commercial mortgage loans held for sale 1,050 16 (189) 877 20
Equity investments
Direct investments 595 157 (3) 749 102
Indirect investments 593 92 (50) 635 74
Total equity investments 1,188 249 (53) 1,384 176
Loans 2 2
Other assets
BlackRock Series C Preferred Stock 486 (86) (4) 396 (86)
Other 23 (4) (12) 7
Total other assets 509 (86) (4) (16) 403 (86)
Total assets $14,151 $(184) $1,222 $(2,784) $33 $(10) $12,428 $(364)
Total liabilities (c) $ 506 $ (71) $ 23 $ 2 $ 460 $ (73)
(a) Losses for assets are bracketed while losses for liabilities are not.
(b) PNCs policy is to recognize transfers in and transfers out as of the end of the reporting period.
(c) Financial derivatives.

Net losses (realized and unrealized) included in earnings
relating to Level 3 assets and liabilities were $74 million for
2011 compared with net losses of $113 million for 2010.
These amounts included net unrealized losses of $204 million
for 2011 compared with net unrealized losses of $291 million
for 2010. These net losses were included in noninterest
income on the Consolidated Income Statement. These
amounts also included amortization and accretion of $109
million for 2011 compared with $153 million for 2010. The
amortization and accretion amounts were included in Interest
income on the Consolidated Income Statement.
During 2011 and 2010, no material transfers of assets or
liabilities between the hierarchy levels occurred.
OTHER FINANCIAL ASSETS ACCOUNTED FOR AT FAIR VALUE
ON A NONRECURRING BASIS
We may be required to measure certain other financial assets
at fair value on a nonrecurring basis. These adjustments to fair
value usually result from the application of
lower-of-cost-or-fair value accounting or write-downs of
individual assets due to impairment.
The amounts below for nonaccrual loans represent the
carrying value of loans for which adjustments are primarily
based on the appraised value of the collateral or the net book
value of the collateral from the borrowers most recent
financial statements if no appraisal is available. As part of the
appraisal process, persons ordering or reviewing appraisals are
independent of the lending customer relationship/loan
production process. Appraisals must be provided by licensed
or certified appraisers and conform to the Uniform Standards
of Professional Appraisal Practice. For loans secured by
commercial properties where the underlying collateral is in
excess of $250,000, appraisals are obtained at least annually.
In certain instances (e.g., physical changes in the property), a
more recent appraisal is obtained. Additionally, borrower
ordered appraisals are not permitted, and PNC ordered

The PNC Financial Services Group, Inc. Form 10-K 153

appraisals are regularly reviewed. We have a real estate
valuation services group whose sole function is to manage the
real estate appraisal solicitation and evaluation process for
commercial loans. All third-party appraisals are reviewed by
this group, including consideration of comments/questions on
the appraisal by the reviewer, customer relationship manager,
credit officer, and underwriter. Upon resolving these
comments/questions through discussions with the third-party
appraiser, adjustments to the initial appraisal may occur and
be incorporated into the final issued appraisal report.
For loans secured by commercial properties where the
underlying collateral is $250,000 and less, there is no
requirement to obtain an appraisal. In instances where an
appraisal is not obtained, the collateral value is determined
consistent with external third-party appraisal standards, by an
internal person independent of the lending customer
relationship/loan production process. If an appraisal is
outdated due to changed project or market conditions, or if the
net book value is utilized, management uses a Loss Given
Default (LGD) percentage which represents the exposure PNC
expects to lose in the event a borrower defaults on an
obligation. Accordingly, LGD is a function of collateral
recovery rates and loan-to-value. Collateral recovery rates
vary based upon collateral type and represent the expected
recovery amount on defaulted loans from the collateral after
workout costs. Those rates are established based upon actual
PNC loss experience and external market data.
The amounts below for loans held for sale represent the
carrying value of loans for which adjustments are primarily
based on observable market data, managements internal
assumptions or the appraised value of collateral. The fair
value determination of the equity investment resulting in an
impairment loss included below was based on observable
market data for other comparable entities as adjusted for
internal assumptions and unobservable inputs. The amounts
below for commercial mortgage servicing rights reflect an
impairment of three strata at both December 31, 2011 and
December 31, 2010, respectively. The fair value of
commercial mortgage servicing rights is estimated by using an
internal valuation model. The model calculates the present
value of estimated future net servicing cash flows considering
estimates of servicing revenue and costs, discount rates and
prepayment speeds. The amounts below for OREO and
foreclosed assets are primarily based on appraised values or
sales price less costs to sell. The amounts below for long-lived
assets held for sale represent the carrying value of the asset
(lower of recorded net book value or sales price less estimated
cost to sell) based upon a recent appraisal, a recent sales offer,
or management assumptions which take into consideration
changes in the market environment or changes in property
conditions.

Fair Value Measurements Nonrecurring (a)

Gains (Losses)
Fair Value Year ended
December 31 December 31 December 31 December 31
In millions 2011 2010 2011 2010
Assets
Nonaccrual loans $ 253 $ 429 $ (49) $ 81
Loans held for sale 130 350 (2) (93)
Equity investments 1 3 (2) (3)
Commercial mortgage servicing rights 457 644 (157) (40)
Other intangible assets 1
OREO and foreclosed assets 223 245 (71) (103)
Long-lived assets held for sale 17 25 (5) (30)
Total assets $1,081 $1,697 $(286) $(188)
(a) All Level 3.

154 The PNC Financial Services Group, Inc. Form 10-K

FINANCIAL ASSETS ACCOUNTED FOR UNDER FAIR VALUE
OPTION
Refer to the Fair Value Measurement section of this Note 8
regarding the fair value of commercial mortgage loans held
for sale, residential mortgage loans held for sale, customer
resale agreements, and BlackRock Series C Preferred Stock.
Commercial Mortgage Loans Held for Sale
Interest income on these loans is recorded as earned and
reported on the Consolidated Income Statement in Other
interest income. The impact on earnings of offsetting
economic hedges is not reflected in these amounts. Changes in
fair value due to instrument-specific credit risk for 2011 and
2010 were not material.
Residential Mortgage Loans Held for Sale and in Portfolio
Interest income on these loans is recorded as earned and
reported on the Consolidated Income Statement in Other
interest income. Throughout 2011 and 2010, certain
residential mortgage loans for which we elected the fair value
option were subsequently reclassified to portfolio loans.
Changes in fair value due to instrument-specific credit risk for
2011 and 2010 were not material.
Customer Resale Agreements
Interest income on resale agreements is reported on the
Consolidated Income Statement in Other interest income.
Changes in fair value due to instrument-specific credit risk for
2011 and 2010 were not material.

Residential Mortgage-Backed Agency Securities With

Embedded Derivatives
Interest income on securities is reported on the Consolidated
Income Statement in Interest income.

The changes in fair value included in Noninterest income for items for which we elected the fair value option follow.

Fair Value Option Changes in Fair Value (a)

Year ended December 31 Gains (Losses)
In millions 2011 2010 2009
Assets
Customer resale agreements $(12) $1 $(26)
Residential mortgage-backed agency securities with embedded derivatives (b) 24
Commercial mortgage loans held for sale 3 16 (68)
Residential mortgage loans held for sale 172 280 405
Residential mortgage loans portfolio (17) 1
BlackRock Series C Preferred Stock (14) (86) 275
(a) The impact on earnings of offsetting hedged items or hedging instruments is not reflected in these amounts.
(b) These residential mortgage-backed agency securities with embedded derivatives are carried as Trading securities.

The PNC Financial Services Group, Inc. Form 10-K 155

Fair values and aggregate unpaid principal balances of items for which we elected the fair value option follow.

Fair Value Option Fair Value and Principal Balances

Aggregate Unpaid
In millions Fair Value Principal Balance Difference

December 31, 2011

Customer resale agreements $ 732 $686 $ 46
Residential mortgage-backed agency securities with embedded derivatives (a) 1,058 864 194
Residential mortgage loans held for sale
Performing loans 1,501 1,439 62
Loans 90 days or more past due 19 25 (6)
Nonaccrual loans 2 4 (2)
Total 1,522 1,468 54
Commercial mortgage loans held for sale (b)
Performing loans 829 962 (133)
Nonaccrual loans 14 27 (13)
Total 843 989 (146)
Residential mortgage loans portfolio
Performing loans 74 97 (23)
Loans 90 days or more past due (c) 90 95 (5)
Nonaccrual loans 63 176 (113)
Total $ 227 $368 $(141)
December 31, 2010
Customer resale agreements $ 866 $806 $ 60
Residential mortgage loans held for sale
Performing loans 1,844 1,839 5
Loans 90 days or more past due 33 41 (8)
Nonaccrual loans 1 2 (1)
Total 1,878 1,882 (4)
Commercial mortgage loans held for sale (b)
Performing loans 847 990 (143)
Nonaccrual loans 30 49 (19)
Total 877 1,039 (162)
Residential mortgage loans portfolio
Performing loans 36 44 (8)
Loans 90 days or more past due (c) 64 67 (3)
Nonaccrual loans 16 31 (15)
Total $ 116 $142 $ (26)
(a) These residential mortgage-backed agency securities with embedded derivatives are carried as Trading securities.
(b) There were no loans 90 days or more past due within this category at December 31, 2011 or December 31, 2010.
(c) The majority of these loans are government insured loans, which positively impacts the fair value.

156 The PNC Financial Services Group, Inc. Form 10-K

ADDITIONAL FAIR VALUE INFORMATION RELATED TO FINANCIAL INSTRUMENTS
December 31, 2011 December 31, 2010
Carrying Fair Carrying Fair
In millions Amount Value Amount Value
Assets
Cash and short-term assets $ 8,567 $8,567 $9,711 $9,711
Trading securities 2,513 2,513 1,826 1,826
Investment securities 60,634 61,018 64,262 64,487
Loans held for sale 2,936 2,939 3,492 3,492
Net loans (excludes leases) 148,254 151,167 139,316 141,431
Other assets 4,019 4,019 4,664 4,664
Mortgage servicing rights 1,115 1,118 1,698 1,707
Financial derivatives
Designated as hedging instruments under GAAP 1,888 1,888 1,255 1,255
Not designated as hedging instruments under GAAP 7,575 7,575 4,502 4,502

Liabilities
Demand, savings and money market deposits 156,335 156,335 141,990 141,990
Time deposits 31,632 31,882 41,400 41,825
Borrowed funds 36,966 39,064 39,821 41,273
Financial derivatives
Designated as hedging instruments under GAAP 116 116 85 85
Not designated as hedging instruments under GAAP 7,490 7,490 4,850 4,850
Unfunded loan commitments and letters of credit 223 223 173 173

The aggregate fair values in the table above do not represent
the total market value of PNCs assets and liabilities as the
table excludes the following:
real and personal property,
lease financing,
loan customer relationships,
deposit customer intangibles,
retail branch networks,
fee-based businesses, such as asset management and
brokerage, and
trademarks and brand names.
We used the following methods and assumptions to estimate
fair value amounts for financial instruments.
GENERAL
For short-term financial instruments realizable in three months
or less, the carrying amount reported on our Consolidated
Balance Sheet approximates fair value. Unless otherwise
stated, the rates used in discounted cash flow analyses are
based on market yield curves.
CASH AND SHORT-TERM ASSETS
The carrying amounts reported on our Consolidated Balance
Sheet for cash and short-term investments approximate fair
values primarily due to their short-term nature. For purposes of
this disclosure only, short-term assets include the following:
due from banks,
interest-earning deposits with banks,
federal funds sold and resale agreements,
cash collateral,
customers acceptances, and
accrued interest receivable.
SECURITIES
Securities include both the investment securities (comprised of
available for sale and held to maturity securities) and trading
portfolios. We primarily use prices obtained from pricing
services, dealer quotes or recent trades to determine the fair
value of securities. As of December 31, 2011, 88% of the
positions in these portfolios were priced by pricing services
provided by third-party vendors. The third-party vendors use a
variety of methods when pricing securities that incorporate
relevant market data to arrive at an estimate of what a buyer in
the marketplace would pay for a security under current market
conditions. One of the vendors prices are set with reference to
market activity for highly liquid assets such as U.S. Treasury
and agency securities and agency mortgage-backed securities,
and matrix pricing for other asset classes, such as commercial
mortgage and other asset-backed securities. Another vendor
primarily uses pricing models considering adjustments for
ratings, spreads, matrix pricing and prepayments for the
instruments we value using this service, such as non-agency
residential mortgage-backed securities, agency adjustable rate
mortgage securities, agency CMOs, commercial mortgage-
backed securities, and municipal bonds. Management uses
various methods and techniques to validate prices obtained
from pricing services and dealers, including reference to

The PNC Financial Services Group, Inc. Form 10-K 157

another third-party source, by reviewing valuations of
comparable instruments, or by comparison to internal
valuations.
NET LOANS AND LOANS HELD FOR SALE
Fair values are estimated based on the discounted value of
expected net cash flows incorporating assumptions about
prepayment rates, net credit losses and servicing fees. For
purchased impaired loans, fair value is assumed to equal
PNCs carrying value, which represents the present value of
expected future principal and interest cash flows, as adjusted
for any ALLL recorded for these loans. See Note 6 Purchased
Impaired Loans for additional information. For revolving
home equity loans and commercial credit lines, this fair value
does not include any amount for new loans or the related fees
that will be generated from the existing customer
relationships. Non-accrual loans are valued at their estimated
recovery value. Also refer to the Fair Value Measurement and
Fair Value Option sections of this Note 8 regarding the fair
value of commercial and residential mortgage loans held for
sale. Loans are presented net of the ALLL and do not include
future accretable discounts related to purchased impaired
loans.
OTHER ASSETS
Other assets as shown in the preceding table include the
following:
FHLB and FRB stock,
equity investments carried at cost and fair value, and
BlackRock Series C Preferred Stock.
Investments accounted for under the equity method, including
our investment in BlackRock, are not included in the
preceding table.
Refer to the Fair Value Measurement section of this Note 8
regarding the fair value of equity investments.
The aggregate carrying value of our investments that are
carried at cost and FHLB and FRB stock was $1.9 billion at
December 31, 2011 and $2.4 billion as of December 31, 2010,
both of which approximate fair value at each date.
158 The PNC Financial Services Group, Inc. Form 10-K
MORTGAGE SERVICING ASSETS
Fair value is based on the present value of the estimated future
cash flows, incorporating assumptions as to prepayment
speeds, discount rates, escrow balances, interest rates, cost to
service and other factors.
The key valuation assumptions for commercial and residential
mortgage loan servicing assets at December 31, 2011 and
December 31, 2010 are included in Note 9 Goodwill and
Other Intangible Assets.
CUSTOMER RESALE AGREEMENTS
Refer to the Fair Value Measurement section of this Note 8
regarding the fair value of customer resale agreements.
DEPOSITS
The carrying amounts of noninterest-bearing demand and
interest-bearing money market and savings deposits
approximate fair values. For time deposits, which include
foreign deposits, fair values are estimated based on the
discounted value of expected net cash flows assuming current
interest rates.
BORROWED FUNDS
The carrying amounts of Federal funds purchased, commercial
paper, repurchase agreements, trading securities sold short,
cash collateral, other short-term borrowings, acceptances
outstanding and accrued interest payable are considered to be
their fair value because of their short-term nature. For all other
borrowed funds, fair values are estimated primarily based on
dealer quotes or discounted cash flow analysis.
UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
The fair value of unfunded loan commitments and letters of
credit is determined from a market participants view
including the impact of changes in interest rates, credit and
other factors. Because our obligation on substantially all
unfunded loan commitments and letters of credit varies with
changes in interest rates, these instruments are subject to little
fluctuation in fair value due to changes in interest rates. We
establish a liability on these facilities related to their
creditworthiness.
FINANCIAL DERIVATIVES
Refer to the Fair Value Measurement section of this Note 8
regarding the fair value of financial derivatives.
NOTE 9 GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in goodwill by business segment during 2011 and 2010 follow:
Changes in Goodwill by Business Segment (a)
Corporate & Asset Residential
Retail Institutional Management Mortgage
In millions Banking Banking Group Banking Other (b) Total

December 31, 2009 $5,369 $2,756 $68 $43 $1,269 $9,505

Sale of GIS (1,232) (1,232)
Other (67) (28) (6) (23) (124)
December 31, 2010 $5,302 $2,728 $62 $43 $ 14 $8,149
BankAtlantic branch acquisition 35 6 41
Flagstar branch acquisition 17 17
Other 40 29 7 2 78
December 31, 2011 $5,394 $2,763 $69 $43 $ 16 $8,285
(a) The Non-Strategic Assets Portfolio business segment does not have any goodwill allocated to it.
(b) Includes goodwill related to BlackRock and GIS prior to the sale of GIS on July 1, 2010. See Note 2 Acquisition and Divestiture Activity for additional information regarding our
July 1, 2010 sale of GIS.

Changes in goodwill and other intangible assets during 2011 determined by using discounted cash flow and market
follow: comparability methodologies.

Summary of Changes in Goodwill and Other Intangible The gross carrying amount, accumulated amortization and net
Assets carrying amount of other intangible assets by major category
consisted of the following:
Customer- Servicing
In millions Goodwill Related Rights

December 31, 2010 $8,149 $903 $1,701 Other Intangible Assets

Additions/adjustments: December 31 December 31
In millions 2011 2010
BankAtlantic branch acquisition 41 1
Customer-related and other intangibles
Flagstar branch acquisition 17 1
Gross carrying amount $1,525 $1,524
Other (a) 78
Accumulated amortization (783) (621)
Mortgage and other loan servicing
rights (266) Net carrying amount $ 742 $ 903
Impairment charge (157) Mortgage and other loan servicing rights
Amortization (163) (161) Gross carrying amount $2,009 $2,293
December 31, 2011 $8,285 $742 $1,117 Valuation allowance (197) (40)
(a) Primarily related to correction of amounts for an acquisition affecting prior periods. Accumulated amortization (695) (552)
Net carrying amount $1,117 $1,701
Assets and liabilities of acquired entities are recorded at Total $1,859 $2,604
estimated fair value as of the acquisition date.
While certain of our other intangible assets have finite lives
We conduct a goodwill impairment test on our reporting units
and are amortized primarily on a straight-line basis, certain
at least annually or more frequently if any adverse triggering
core deposit intangibles are amortized on an accelerated basis.
events occur. Based on the results of our analysis, there were
no impairment charges related to goodwill recognized in 2011,
For customer-related and other intangibles, the estimated
2010 or 2009. The fair value of our reporting units is
remaining useful lives range from 1 year to 10 years, with a
weighted-average remaining useful life of 8 years.

The PNC Financial Services Group, Inc. Form 10-K 159

Amortization expense on existing intangible assets follows: The fair value of commercial MSRs is estimated by using an
internal valuation model. The model calculates the present
Amortization Expense on Existing Intangible Assets value of estimated future net servicing cash flows considering
estimates of servicing revenue and costs, discount rates and
In millions prepayment speeds.
2009 $326
2010 304 Changes in the residential MSRs follow:
2011 324
Residential Mortgage Servicing Rights
2012 264
In millions 2011 2010 2009
2013 203
January 1 $ 1,033 $ 1,332 $ 1,008
2014 198
Additions:
2015 183
From loans sold with
2016 159 servicing retained 118 95 261
Purchases 65
Changes in commercial mortgage servicing rights follow: Sales (74)
Changes in fair value due to:
Commercial Mortgage Servicing Rights
Time and payoffs (a) (163) (185) (264)
In millions 2011 2010 2009 Purchase accounting
January 1 $ 665 $ 921 $864 adjustments 17
Additions (a) 120 83 121 Other (b) (406) (209) 384
Acquisition adjustment 1 December 31 $ 647 $ 1,033 $ 1,332
Sale of servicing rights (b) (192) Unpaid principal balance of
loans serviced for others at
Impairment charge (157) (40) 35 December 31 $118,058 $125,806 $146,050
Amortization expense (160) (107) (100) (a) Represents decrease in MSR value due to passage of time, including the impact from
December 31 $ 468 $ 665 $921 both regularly scheduled loan principal payments and loans that were paid down or
paid off during the period.
Valuation allowance: (b) Represents MSRs value changes resulting primarily from market-driven changes in
interest rates.
January 1 $ (40) $ (35)
Provision (166) $(110) (1)
We recognize mortgage servicing right assets on residential
Recoveries 9 70 36 real estate loans when we retain the obligation to service these
December 31 $(197) $ (40) $ loans upon sale and the servicing fee is more than adequate
(a) Additions for 2011 included $55 million from loans sold with servicing retained and compensation. MSRs are subject to declines in value
$65 million from purchases of servicing rights from third parties. Comparable
amounts were $45 million and $38 million for 2010 and $92 million and $29 million
principally from actual or expected prepayment of the
for 2009. underlying loans and defaults. We manage this risk by
(b) Reflects the sale of a duplicative agency servicing operation in 2010. economically hedging the fair value of MSRs with securities
and derivative instruments which are expected to increase in
We recognize as an other intangible asset the right to service value when the value of MSRs declines.
mortgage loans for others. Commercial MSRs are purchased
and originated when loans are sold with servicing retained. The fair value of residential MSRs is estimated by using a
Commercial MSRs are initially recorded at fair value. These cash flow valuation model which calculates the present value
rights are subsequently accounted for at the lower of of estimated future net servicing cash flows, taking into
amortized cost or fair value, and are substantially amortized in consideration actual and expected mortgage loan prepayment
proportion to and over the period of estimated net servicing rates, discount rates, servicing costs, and other economic
income of 5 to 10 years. factors which are determined based on current market
conditions.
Commercial MSRs are periodically evaluated for impairment.
For purposes of impairment, the commercial MSRs are The fair value of residential and commercial MSRs and
stratified based on asset type, which characterizes the significant inputs to the valuation model as of December 31,
predominant risk of the underlying financial asset. If the 2011 are shown in the tables below. The expected and actual
carrying amount of any individual stratum exceeds its fair rates of mortgage loan prepayments are significant factors
value, a valuation reserve is established with a corresponding driving the fair value. Management uses a third-party model to
charge to Corporate services on our Consolidated Income estimate future residential loan prepayments and internal
Statement. proprietary models to estimate future commercial loan

160 The PNC Financial Services Group, Inc. Form 10-K

prepayments. These models have been refined based on Residential Mortgage Servicing Rights Key Valuation
current market conditions. Future interest rates are another Assumptions
important factor in the valuation of MSRs. Management
December 31 December 31
utilizes market implied forward interest rates to estimate the Dollars in millions 2011 2010
future direction of mortgage and discount rates. The forward Fair value $647 $1,033
rates utilized are derived from the current yield curve for U.S.
Weighted-average life (years) 3.6 5.8
dollar interest rate swaps and are consistent with pricing of
capital markets instruments. Changes in the shape and slope of Weighted-average constant prepayment
rate 22.10% 12.61%
the forward curve in future periods may result in volatility in
the fair value estimate. Decline in fair value from 10% adverse
change $44 $41
A sensitivity analysis of the hypothetical effect on the fair Decline in fair value from 20% adverse
value of MSRs to adverse changes in key assumptions is change $84 $86
presented below. These sensitivities do not include the impact Weighted-average option adjusted spread 11.77% 12.18%
of the related hedging activities. Changes in fair value Decline in fair value from 10% adverse
generally cannot be extrapolated because the relationship of change $25 $43
the change in the assumption to the change in fair value may Decline in fair value from 20% adverse
not be linear. Also, the effect of a variation in a particular change $48 $83
assumption on the fair value of the MSRs is calculated
independently without changing any other assumption. In Fees from mortgage and other loan servicing comprised of
reality, changes in one factor may result in changes in another contractually specified servicing fees, late fees, and ancillary
(for example, changes in mortgage interest rates, which drive fees follows:
changes in prepayment rate estimates, could result in changes
in the interest rate spread), which could either magnify or Fees from Mortgage and Other Loan Servicing
counteract the sensitivities.
In millions 2011 2010 2009
The following tables set forth the fair value of commercial and Fees from mortgage and other loan servicing $641 $692 $825
residential MSRs and the sensitivity analysis of the
hypothetical effect on the fair value of MSRs to immediate We also generate servicing fees from fee-based activities
adverse changes of 10% and 20% in those assumptions: provided to others.
Commercial Mortgage Servicing Rights Key Valuation Fees from commercial MSRs, residential MSRs and other loan
Assumptions servicing are reported on our Consolidated Income Statement
December 31 December 31 in the line items Corporate services, Residential mortgage, and
Dollars in millions 2011 2010 Consumer services, respectively.
Fair value $471 $674
Weighted-average life (years) 5.9 6.3 NOTE 10 PREMISES, EQUIPMENT AND
Prepayment rate range (a) 13%-28% 10%-24% LEASEHOLD IMPROVEMENTS
Decline in fair value from 10% adverse Premises, equipment and leasehold improvements, stated at
change $6 $8 cost less accumulated depreciation and amortization, were as
Decline in fair value from 20% adverse follows:
change $11 $16
Effective discount rate range 6%-9% 7%-9% Premises, Equipment and Leasehold Improvements
Decline in fair value from 10% adverse December 31 - in millions 2011 2010
change $9 $13
Land $ 690 $ 659
Decline in fair value from 20% adverse
Buildings 1,955 1,644
change $18 $26
(a) Represents modeled prepayment rates considering the effective dates of prepayment Equipment 3,894 3,335
penalties. Leasehold improvements 651 593
Total 7,190 6,231
Accumulated depreciation and amortization (2,546) (2,172)
Net book value $ 4,644 $ 4,059

The PNC Financial Services Group, Inc. Form 10-K 161

Depreciation expense on premises, equipment and leasehold NOTE 12 BORROWED FUNDS
improvements and amortization expense, primarily for Bank notes along with senior and subordinated notes consisted
capitalized internally developed software, was as follows: of the following:

Depreciation and Amortization Expense Bank Notes, Senior Debt and Subordinated Debt
Year ended December 31 December 31, 2011
in millions 2011 2010 2009 Dollars in millions Outstanding Stated Rate Maturity

Continuing operations: Bank notes $ 510 zero 4.66% 2013-2043

Depreciation $474 $455 $466 Senior debt 11,283 .57% 6.70% 2012-2020
Amortization 22 45 79 Bank notes and senior
Discontinued operations: debt $11,793
Depreciation 12 29 Subordinated debt
Amortization 11 26 Junior $ 2,377 1.10% 10.18% 2028-2068
Other 5,944 .90% 8.11% 2013-2019
We lease certain facilities and equipment under agreements Subordinated debt $ 8,321
expiring at various dates through the year 2067. We account
for these as operating leases. Rental expense on such leases Included in outstandings for the senior and subordinated notes
was as follows: in the table above are basis adjustments of $434 million and
$591 million, respectively, related to fair value accounting
Lease Rental Expense hedges as of December 31, 2011.
Year ended December 31
in millions 2011 2010 2009 Total borrowed funds of $36.7 billion at December 31, 2011
Continuing operations: $357 $379 $372 have contractually scheduled repayments, including related
purchase accounting adjustments, as follows:
Discontinued operations: 10 16
2012: $15.8 billion,
2013: $3.4 billion,
Required minimum annual rentals that we owe on 2014: $2.7 billion,
noncancelable leases having initial or remaining terms in 2015: $2.8 billion,
excess of one year totaled $2.5 billion at December 31, 2011. 2016: $1.9 billion, and
Future minimum annual rentals are as follows: 2017 and thereafter: $10.1 billion.
2012: $342 million,
2013: $312 million, Included in borrowed funds are FHLB borrowings of $7.0
2014: $274 million, billion at December 31, 2011, which are collateralized by a
2015: $221 million, blanket lien on residential mortgage and other real estate-
2016: $188 million, and related loans. FHLB advances of $3.0 billion have scheduled
2017 and thereafter: $1.2 billion. maturities of less than one year. The remainder of the FHLB
borrowings have balances that will mature from 2012 2030,
NOTE 11 TIME DEPOSITS with interest rates ranging from zero to 7.33%.
The aggregate amount of time deposits with a denomination of
$100,000 or more was $11.2 billion at December 31, 2011 and As part of the National City acquisition, PNC assumed a
$15.5 billion at December 31, 2010. liability for the payment at maturity or earlier of $1.4 billion
of convertible senior notes with a fixed interest rate of 4.0%
Total time deposits of $31.6 billion at December 31, 2011 payable semiannually. The notes matured and were paid off on
have future contractual maturities, including related purchase February 1, 2011 except for notes that were converted prior to
accounting adjustments, as follows: the maturity date. Prior to November 15, 2010, holders were
2012: $25.0 billion, entitled to convert the notes, at their option, under certain
2013: $3.0 billion, circumstances, none of which were satisfied. After
2014: $1.2 billion, November 15, 2010, the holders were entitled to convert their
2015: $0.9 billion, notes at any time through the third scheduled trading date
2016: $0.3 billion, and preceding the maturity date, and certain holders did elect to
2017 and thereafter: $1.2 billion. convert a de minimis amount of notes. Upon conversion, PNC
paid cash related to the principal amount of such notes. PNC
was not required to issue any shares of its common stock for
any conversion value.

162 The PNC Financial Services Group, Inc. Form 10-K

The $2.4 billion of junior subordinated debt included in the above table represents debt redeemable prior to maturity. The call price
and related premiums are discussed in Note 13 Capital Securities of Subsidiary Trusts and Perpetual Trust Securities.
NOTE 13 CAPITAL SECURITIES OF SUBSIDIARY TRUSTS AND PERPETUAL TRUST SECURITIES
At December 31, 2011, capital securities totaling $2.7 billion represented non-voting preferred beneficial interests in the assets of
the following Trusts:
Capital Securities of Subsidiary Trusts
Trust
PNC Capital Trust C
PNC Capital Trust D
Fidelity Capital Trust II
Yardville Capital Trust VI
Fidelity Capital Trust III
Sterling Financial Statutory Trust III
Sterling Financial Statutory Trust IV
MAF Bancorp Capital Trust I
MAF Bancorp Capital Trust II
James Monroe Statutory Trust III
Yardville Capital Trust III
Date Formed Description of Capital Securities Redeemable
June 1998 $200 million due June 1, 2028, bearing On or after June 1, 2008 at par.
interest at a floating rate per annum equal to
3-month LIBOR plus 57 basis points. The
rate in effect at December 31, 2011 was
1.097%.
December 2003 $300 million of 6.125% capital securities On or after December 18, 2008 at par.
due December 15, 2033.
December 2003 $22 million due January 23, 2034 bearing an On or after January 23, 2009 at par.
interest rate of 3-month LIBOR plus 285
basis points. The rate in effect at
December 31, 2011 was 3.278%.
June 2004 $15 million due July 23, 2034, bearing an On or after July 23, 2009 at par.
interest rate equal to 3-month LIBOR plus
270 basis points. The rate in effect at
December 31, 2011 was 3.116%.
October 2004 $30 million due November 23, 2034 bearing On or after November 23, 2009 at par.
an interest rate of 3-month LIBOR plus 197
basis points. The rate in effect at
December 31, 2011 was 2.465%.
December 2004 $15 million due December 15, 2034 at a On or after December 15, 2009 at par.
fixed rate of 6%. The fixed rate remained in
effect until December 15, 2009 at which
time the securities began paying a floating
rate of 3-month LIBOR plus 189 basis
points. The rate in effect at December 31,
2011 was 2.436%.
February 2005 $15 million due March 15, 2035 at a fixed On or after March 15, 2010 at par.
rate of 6.19%. The fixed rate remained in
effect until March 15, 2010 at which time
the securities began paying a floating rate of
3-month LIBOR plus 187 basis points. The
rate in effect at December 31, 2011 was
2.416%.
April 2005 $30 million due June 15, 2035 bearing an On or after June 15, 2010 at par.
interest rate of 3-month LIBOR plus 175
basis points. The rate in effect at
December 31, 2011 was 2.296%.
August 2005 $35 million due September 15, 2035 bearing On or after September 15, 2010 at par.
an interest rate of 3-month LIBOR plus 140
basis points. The rate in effect at
December 31, 2011 was 1.946%.
September 2005 $8 million due December 15, 2035 at a On or after December 15, 2010 at par.
fixed rate of 6.253%. The fixed rate
remained in effect until September 15, 2010
at which time the securities began paying a
floating rate of LIBOR plus 155 basis
points. The rate in effect at December 31,
2011 was 2.096%.
March 2001 $6 million of 10.18% capital securities due On or after June 8, 2011 at par plus a
June 8, 2031. premium of up to 5.09%.
The PNC Financial Services Group, Inc. Form 10-K 163
 Trust Date Formed Description of Capital Securities Redeemable
Sterling Financial Statutory Trust V March 2007 $20 million due March 15, 2037 at a fixed March 15, 2012 at par.
rate of 7%. The fixed rate remained in effect
until June 15, 2007 at which time the
securities began paying a floating rate of 3-
month LIBOR plus 165 basis points. The
rate in effect at December 31, 2011 was
2.196%.

National City Capital Trust III
May 2007 $500 million due May 25, 2067 at a fixed On or after May 25, 2012 at par.
rate of 6.625%. The fixed rate remains in
effect until May 25, 2047 at which time the
securities pay a floating rate of one-month
LIBOR plus 212.63 basis points.

National City Capital Trust IV
August 2007 $518 million due August 30, 2067 at a fixed On or after August 30, 2012 at par.
rate of 8.00%. The fixed rate remains in
effect until September 15, 2047 at which
time the securities pay a floating rate of one-
month LIBOR plus 348.7 basis points.

National City Preferred Capital Trust I
January 2008 $500 million due December 10, 2043 at a On or after December 10, 2012 at par.
fixed rate of 12.00%. The fixed rate remains
in effect until December 10, 2012 at which
time the interest rate resets to 3-month
LIBOR plus 861 basis points.

PNC Capital Trust E February 2008 $450 million of 7.75% capital securities due On or after March 15, 2013 at par.*
March 15, 2068.
* If we redeem or repurchase the trust preferred securities of, and the junior subordinated notes payable to, PNC Capital Trust E during the period from March 15, 2038 through
March 15, 2048, we are subject to the terms of a replacement capital covenant requiring PNC to have received proceeds from the issuance of certain qualified securities prior to the
redemption or repurchase, unless the replacement capital covenant has been terminated pursuant to its terms. As of December 31, 2011, the beneficiaries of this limitation are the
holders of our $300 million of 6.125% Junior Subordinated Notes issued December 2003.

All of these Trusts are wholly owned finance subsidiaries of
PNC. In the event of certain changes or amendments to
regulatory requirements or federal tax rules, the capital
securities are redeemable in whole. In accordance with GAAP,
the financial statements of the Trusts are not included in
PNCs consolidated financial statements.
At December 31, 2011, PNCs junior subordinated debt with a
carrying value of $2.4 billion represented debentures
purchased and held as assets by the Trusts.
The obligations of the respective parent of each Trust, when
taken collectively, are the equivalent of a full and
unconditional guarantee of the obligations of such Trust under
the terms of the Capital Securities. Such guarantee is
subordinate in right of payment in the same manner as other
junior subordinated debt. There are certain restrictions on
PNCs overall ability to obtain funds from its subsidiaries. For
additional disclosure on these funding restrictions, including
an explanation of dividend and intercompany loan limitations,
see Note 21 Regulatory Matters. PNC is also subject to
restrictions on dividends and other provisions potentially
imposed under the Exchange Agreements with Trust II and
Trust III as described in the following Perpetual Trust
Securities section and to other provisions similar to or in some
ways more restrictive than those potentially imposed under
those agreements. In September 2010, we redeemed all of the
underlying capital securities of Sterling Financial Statutory
Trust II, Yardville Capital Trusts II and IV, and James
Monroe Statutory Trust II. The capital securities redeemed
totaled $71 million. In October 2010, we redeemed all of the
underlying capital securities of Yardville Capital Trust V. The
capital securities redeemed totaled $10 million. In November
2011, we redeemed all of the underlying capital securities of
National City Capital Trust II. The capital securities redeemed
totaled $750 million.

Perpetual Trust Securities Summary

We have issued certain hybrid capital vehicles that currently qualify as capital for regulatory purposes.
Date Entity (a) Private Placement (b) Rate Trust Issuing Notes (c)

February 2008 PNC Preferred Funding LLC $375 million 8.700% PNC Preferred Funding Trust III (d)
March 2007 PNC Preferred Funding LLC $500 million 6.113% PNC Preferred Funding Trust II (e)
December 2006 PNC Preferred Funding LLC $500 million 6.517% PNC Preferred Funding Trust I (f)
(a) PNC REIT Corp. owns 100% of the LLCs common voting securities. As a result, the LLC is an indirect subsidiary of PNC and is consolidated on PNCs Consolidated Balance Sheet.
(b) Fixed-to-Floating Rate Non-Cumulative Exchangeable Perpetual Trust Securities.
(c) The trusts investments in the LLCs preferred securities are characterized as a noncontrolling interest on our Consolidated Balance Sheet. This noncontrolling interest totaled
approximately $1.3 billion at December 31, 2011.
(d) Automatically exchangeable into a share of Series J Non-Cumulative Perpetual Preferred Stock of PNC.
(e) Automatically exchangeable into a share of Series I Non-Cumulative Perpetual Preferred Stock of PNC (Series I Preferred Stock).
(f) Automatically exchangeable into a share of Series F Non-Cumulative Perpetual Preferred Stock of PNC Bank, N.A. (PNC Bank Preferred Stock).

164 The PNC Financial Services Group, Inc. Form 10-K

These Trust Securities are automatically exchangeable as set forth above under certain conditions relating to the capitalization or
the financial condition of PNC Bank, N.A. and upon the direction of the Office of the Comptroller of the Currency.

Summary of Replacement Capital Covenants of Perpetual Trust Securities

Replacement Capital Covenant (a)
Trust I RCC
Trust Description of Capital Covenants
PNC Preferred Funding Trust I Neither we nor our subsidiaries (other than PNC Bank, N.A. and its subsidiaries) would
purchase the Trust Securities, the LLC Preferred Securities or the PNC Bank Preferred
Stock unless such repurchases or redemptions are made from proceeds of the issuance
of certain qualified securities and pursuant to the other terms and conditions set forth in
the Trust I RCC.

Trust II RCC PNC Preferred Funding Trust II Until March 29, 2017, neither we nor our subsidiaries would purchase or redeem the
Trust II Securities, the LLC Preferred Securities or the Series I Preferred Stock unless
such repurchases or redemptions are made from proceeds of the issuance of certain
qualified securities and pursuant to the other terms and conditions set forth in the Trust
II RCC.
(a) As of December 31, 2011, each of the Trust I RCC and the Trust II RCC are for the benefit of holders of our $200 million of Floating Rate Junior Subordinated Notes issued in June
1998.

Summary of Contractual Commitments of Perpetual Trust Securities

Trust Description of Restrictions on Dividend Payments (c)
PNC Preferred Funding Trust I (a) If full dividends are not paid in a dividend period, PNC Bank, N.A. nor its subsidiaries will declare or pay dividends or
other distributions with respect to, or redeem, purchase or acquire or make a liquidation payment with respect to, any of
its equity capital securities during the next succeeding period (other than to holders of the LLC Preferred Securities and
any parity equity securities issued by the LLC). (d)
PNC Preferred Funding Trust II (b) If full dividends are not paid in a dividend period, PNC will not declare or pay dividends with respect to, or redeem,
purchase or acquire, any of its equity capital securities during the next succeeding dividend period. (e)
PNC Preferred Funding Trust III (b) If full dividends are not paid in a dividend period, PNC will not declare or pay dividends with respect to, or redeem,
purchase or acquire, any of its equity capital securities during the next succeeding dividend period. (e)
(a) Contractual commitments made by PNC Bank, N.A.
(b) Contractual commitments made by PNC.
(c) Applies to the applicable Trust Securities and the LLC Preferred Securities.
(d) Except: (i) in the case of dividends payable to subsidiaries of PNC Bank, N.A., to PNC Bank, N.A. or another wholly-owned subsidiary of PNC Bank, N.A. or (ii) in the case of
dividends payable to persons that are not subsidiaries of PNC Bank, N.A., to such persons only if, (A) in the case of a cash dividend, (PNC has first irrevocably committed to
contribute amounts at least equal to such cash dividend or (B) in the case of in-kind dividends payable by PNC REIT Corp., PNC has committed to purchase such in-kind dividend
from the applicable PNC REIT Corp. holders in exchange for a cash payment representing the market value of such in-kind dividend, and PNC has committed to contribute such
in-kind dividend to PNC Bank, N.A.
(e) Except for: (i) purchases, redemptions or other acquisitions of shares of capital stock of PNC in connection with any employment contract, benefit plan or other similar arrangement
with or for the benefit of employees, officers, directors or consultants, (ii) purchases of shares of common stock of PNC pursuant to a contractually binding requirement to buy stock
existing prior to the commencement of the extension period, including under a contractually binding stock repurchase plan, (iii) any dividend in connection with the implementation of
a shareholders rights plan, or the redemption or repurchase of any rights under any such plan, (iv) as a result of any exchange or conversion of any class or series of PNCs capital
stock for any other class or series of PNCs capital stock, (v) the purchase of fractional interests in shares of PNC capital stock pursuant to the conversion or exchange provisions of
such stock or the security being converted or exchanged or (vi) any stock dividends paid by PNC where the dividend stock is the same stock as that on which the dividend is being
paid.

NOTE 14 EMPLOYEE BENEFIT PLANS
PENSION AND POSTRETIREMENT PLANS
We have a noncontributory, qualified defined benefit pension
plan covering eligible employees. Benefits are determined
using a cash balance formula where earnings credits are a
percentage of eligible compensation. Earnings credit
percentages for plan participants on December 31, 2009 are
frozen at their level earned to that point. Earnings credits for
all employees who become participants on or after January 1,
2010 are a flat 3% of eligible compensation. Participants at
December 31, 2009 earn interest based on 30-year Treasury
securities with a minimum rate, while new participants on or
after January 1, 2010 are not subject to the minimum rate.
Pension contributions are based on an actuarially determined
amount necessary to fund total benefits payable to plan
participants.
We also maintain nonqualified supplemental retirement plans
for certain employees and provide certain health care and life
insurance benefits for qualifying retired employees
(postretirement benefits) through various plans. The
nonqualified pension and postretirement benefit plans are
unfunded. The Company reserves the right to terminate or
make plan changes at any time.

The PNC Financial Services Group, Inc. Form 10-K 165

We use a measurement date of December 31 for plan assets and benefit obligations. A reconciliation of the changes in the
projected benefit obligation for qualified pension, nonqualified pension and postretirement benefit plans as well as the change in
plan assets for the qualified pension plan follows:

Reconciliation of Changes in Projected Benefit Obligation and Change in Plan Assets

Qualified Nonqualified Postretirement
Pension Pension Benefits
December 31 (Measurement Date) in millions 2011 2010 2011 2010 2011 2010
Accumulated benefit obligation at end of year $4,095 $3,619 $ 289 $ 286
Projected benefit obligation at beginning of year $3,803 $3,611 $ 290 $ 282 $ 393 $ 374
Service cost 94 102 4 3 7 5
Interest cost 196 203 13 14 19 20
Actuarial losses and changes in assumptions 304 92 15 11 (1) 20
Participant contributions 13 14
Federal Medicare subsidy on benefits paid 2 2
Early Retirement Reinsurance Program payments received 1
Benefits paid (209) (205) (25) (20) (37) (42)
Projected benefit obligation at end of year $4,188 $3,803 $ 297 $ 290 $ 397 $ 393
Fair value of plan assets at beginning of year $3,991 $3,721
Actual return on plan assets 23 475
Employer contribution $ 25 $ 20 $ 22 $ 26
Participant contributions 13 14
Federal Medicare subsidy on benefits paid 2 2
Benefits paid (209) (205) (25) (20) (37) (42)
Fair value of plan assets at end of year $3,805 $3,991
Funded status $ (383) $ 188 $(297) $(290) $(397) $(393)
Amounts recognized in the statement of financial positions
Noncurrent asset 188
Current liability (30) (33) (34) (35)
Noncurrent liability (383) (267) (257) (363) (358)
Net amount recognized on the balance sheet $ (383) $ 188 $(297) $(290) $(397) $(393)
Amounts recognized in accumulated other comprehensive income consist of:
Prior service cost (credit) $ (39) $ (46) $ 2 $ 2 $ (11) $ (14)
Net actuarial loss 1,087 526 71 61 54 55
Amount recognized in AOCI $1,048 $ 480 $ 73 $ 63 $ 43 $ 41

At December 31, 2011, the fair value of the qualified pension
plan assets were less than both the accumulated benefit
obligation and the projected benefit obligation. This is due to
unfavorable 2011 investment returns, as well as an increase in
obligations due to a drop in the discount rate. The
nonqualified pension plan is unfunded. Contributions from us
and, in the case of postretirement benefit plans, participant
contributions cover all benefits paid under the nonqualified
pension plan and postretirement benefit plans. The
postretirement plan provides benefits to certain retirees that
are at least actuarially equivalent to those provided by
Medicare Part D and accordingly, we receive a federal subsidy
as shown in the table.
The Early Retiree Reinsurance Program (ERRP) was
established by the Patient Protection and Affordable Care Act.
Congress appropriated funding of $5 billion for this temporary
ERRP to provide financial assistance to employers, unions,
and state and local governments to help them maintain
coverage for early retirees age 55 and older who are not yet
eligible for Medicare, including their spouses, surviving
spouses, and dependents. The ERRP ceased accepting
applications after May 5, 2011. PNC submitted an application
for reimbursement from the ERRP in 2011 for the 2010 and
2011 plan years. In 2011, PNC received reimbursement of $.6
million related to the 2010 plan year. The reimbursement for
the 2011 plan year is not reflected in the above financial
statements because the reimbursement of $.9 million was not
approved until 2012. These reimbursements will be used to
offset increases in the employers costs of maintaining
coverage.

166 The PNC Financial Services Group, Inc. Form 10-K

PNC PENSION PLAN ASSETS active investment management and policy implementation.
Assets related to our qualified pension plan (the Plan) are held This investment objective is expected to be achieved over the
in trust (the Trust). Effective July 1, 2011, the trustee is The long term (one or more market cycles) and is measured over
Bank of New York Mellon; prior to that date, the trustee was rolling five-year periods. Total return calculations are time-
PNC Bank, National Association, (PNC Bank, N.A). The weighted and are net of investment-related fees and expenses.
Trust is exempt from tax pursuant to section 501(a) of the
Internal Revenue Code (the Code). The Plan is qualified under
The asset strategy allocations for the Trust at the end of 2011
section 401(a) of the Code. Plan assets consist primarily of
and 2010, and the target allocation range at the end of 2011,
listed domestic and international equity securities and US
by asset category, are as follows:
government, agency, and corporate debt securities and real
estate investments. Plan assets as of December 31, 2011 and
2010 include common stock of PNC. PNC Common Stock Asset Strategy Allocations
was $11 million and $12 million at December 31, 2011 and
December 31, 2010, respectively. At December 31, 2011, this Percentage
of Plan
accounted for less than 1% of our total asset balance. Target Assets by
Allocation Strategy at
Range December 31
The Pension Plan Administrative Committee (the Committee) PNC Pension Plan 2011 2010
adopted a current Pension Plan Investment Policy Statement, Asset Category
including target allocations and allowable ranges, on Domestic Equity 20-40% 41% 40%
August 13, 2008. On February 25, 2010, the Committee
International Equity 10-25% 21% 21%
amended the investment policy to include a dynamic asset
allocation approach and also updated target allocation ranges Private Equity 0-10% 3% 2%
for certain asset categories. On March 1, 2011, the Committee Total Equity 40-70% 65% 63%
amended the investment policy to update the target allocation Domestic Fixed Income 20-40% 20% 24%
ranges for certain asset categories. High Yield Fixed Income 0-15% 12% 10%
Total Fixed Income 20-55% 32% 34%
The long-term investment strategy for pension plan assets is
Real estate 0-10% 3% 3%
to:
Meet present and future benefit obligations to all Other 0-5% 0% 0%
participants and beneficiaries, Total 100% 100%
Cover reasonable expenses incurred to provide such
benefits, including expenses incurred in the
The asset category represents the allocation of Plan assets in
administration of the Trust and the Plan,
accordance with the investment objective of each of the Plans
Provide sufficient liquidity to meet benefit and
investment managers. Certain domestic equity investment
expense payment requirements on a timely basis, and
managers utilize derivatives and fixed income securities as
Provide a total return that, over the long term,
described in their Investment Management Agreements to
maximizes the ratio of trust assets to liabilities by
achieve their investment objective under the Investment
maximizing investment return, at an appropriate level
Policy Statement. Other investment managers may invest in
of risk.
eligible securities outside of their assigned asset category to
meet their investment objectives. The actual percentage of the
Under the dynamic asset allocation strategy, scenarios are
fair value of total plan assets held as of December 31, 2011 for
outlined in which the Committee has the ability to make short
equity securities, fixed income securities, real estate and all
to intermediate term asset allocation shifts based on factors
other assets are 61%, 31%, 3%, and 5%, respectively.
such as the Plans funded status, the Committees view of
return on equities relative to long term expectations, the
Committees view on the direction of interest rates and credit We believe that, over the long term, asset allocation is the
spreads, and other relevant financial or economic factors single greatest determinant of risk. Asset allocation will
which would be expected to impact the ability of the Trust to deviate from the target percentages due to market movement,
meet its obligation to beneficiaries. Accordingly, the cash flows, investment manager performance and
allowable asset allocation ranges have been updated to implementation of shifts under the dynamic allocation policy.
incorporate the flexibility required by the dynamic allocation Material deviations from the asset allocation targets can alter
policy. the expected return and risk of the Trust. On the other hand,
frequent rebalancing to the asset allocation targets may result
The Plans specific investment objective is to meet or exceed in significant transaction costs, which can impair the Trusts
the investment policy benchmark over the long term. The ability to meet its investment objective. Accordingly, the Trust
investment policy benchmark compares actual performance to portfolio is periodically rebalanced to maintain asset
a weighted market index, and measures the contribution of allocation within the target ranges described above.

The PNC Financial Services Group, Inc. Form 10-K 167

In addition to being diversified across asset classes, the Trust
is diversified within each asset class. Secondary
diversification provides a reasonable basis for the expectation
that no single security or class of securities will have a
disproportionate impact on the total risk and return of the
Trust.
The Committee selects investment managers for the Trust
based on the contributions that their respective investment
styles and processes are expected to make to the investment
performance of the overall portfolio. The managers
Investment Objectives and Guidelines, which are a part of
each managers Investment Management Agreement,
document performance expectations and each managers role
in the portfolio. The Committee uses the Investment
Objectives and Guidelines to establish, guide, control and
measure the strategy and performance for each manager.
The purpose of investment manager guidelines is to:
Establish the investment objective and performance
standards for each manager,
Provide the manager with the capability to evaluate
the risks of all financial instruments or other assets in
which the managers account is invested, and
Prevent the manager from exposing its account to
excessive levels of risk, undesired or inappropriate
risk, or disproportionate concentration of risk.
The guidelines also indicate which investments and strategies
the manager is permitted to use to achieve its performance
objectives, and which investments and strategies it is
prohibited from using.
Where public market investment strategies may include the
use of derivatives and/or currency management, language is
incorporated in the managers guidelines to define allowable
and prohibited transactions and/or strategies. Derivatives are
typically employed by investment managers to modify risk/
return characteristics of their portfolio(s), implement asset
allocation changes in a cost-effective manner, or reduce
transaction costs. Under the managers investment guidelines,
derivatives may not be used solely for speculation or leverage.
Derivatives are used only in circumstances where they offer
the most efficient economic means of improving the risk/
reward profile of the portfolio.
BlackRock receives compensation for providing investment
management services. The Asset Management Group business
segment also receives compensation for payor-related
services, and received compensation for providing trustee/
custodian services prior to July 1, 2011. Compensation for
such services is paid by PNC and was not significant for 2011,
2010 or 2009. Non-affiliate service providers for the Trust are
compensated from plan assets.
168 The PNC Financial Services Group, Inc. Form 10-K
FAIR VALUE MEASUREMENTS
As further described in Note 8 Fair Value, GAAP establishes
the framework for measuring fair value, including a hierarchy
used to classify the inputs used in measuring fair value.
A description of the valuation methodologies used for assets
measured at fair value follows. There have been no changes in
the methodologies used at December 31, 2011 compared with
those in place at December 31, 2010:
Money market and mutual funds are valued at the net
asset value of the shares held by the pension plan at
year-end.
US government securities, corporate debt, common
stock and preferred stock are valued at the closing
price reported on the active market on which the
individual securities are traded. If quoted market
prices are not available for the specific security, then
fair values are estimated by using pricing models or
quoted prices of securities with similar
characteristics. Such securities are generally
classified within level 2 of the valuation hierarchy
but may be a level 3 depending on the level of
liquidity and activity in the market for the security.
The collective trust fund investments are valued
based upon the units of such collective trust fund
held by the plan at year end multiplied by the
respective unit value. The unit value of the collective
trust fund is based upon significant observable inputs,
although it is not based upon quoted marked prices in
an active market. The underlying investments of the
collective trust funds consist primarily of equity
securities, debt obligations, short-term investments,
and other marketable securities. Due to the nature of
these securities, there are no unfunded commitments
or redemption restrictions.
Limited partnerships are valued by investment
managers based on recent financial information used
to estimate fair value. Other investments held by the
pension plan include derivative financial instruments
and real estate, which are recorded at estimated fair
value as determined by third-party appraisals and
pricing models, and group annuity contracts which
are measured at fair value by discounting the related
cash flows based on current yields of similar
instruments with comparable durations considering
the credit-worthiness of the issuer.
These methods may result in fair value calculations that may
not be indicative of net realizable values or future fair values.
Furthermore, while the pension plan believes its valuation
methods are appropriate and consistent with other market
participants, the use of different methodologies or
assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement
at the reporting date.
The following table sets forth by level, within the fair value hierarchy, the Plans assets at fair value as of December 31, 2011 and
2010:

Pension Plan Assets Fair Value Hierarchy

Fair Value Measurements Using:
Significant
Quoted Prices in Other Significant
December 31 Active Markets Observable Unobservable
2011 For Identical Inputs Inputs
In millions Fair Value Assets (Level 1) (Level 2) (Level 3)
Cash $ 2 $ 2
Money market funds 137 135 $ 2
US government and agency securities 395 114 281
Corporate debt (a) 799 722 $ 77
Common stock 933 933
Preferred stock 13 9 2 2
Mutual funds 37 37
Interest in Collective Funds (b) 1,314 937 377
Limited partnerships 130 130
Other 45 2 16 27
Total $3,805 $1,195 $1,997 $613

Fair Value Measurements Using:

Significant
Quoted Prices in Other Significant
December 31 Active Markets Observable Unobservable
2010 For Identical Inputs Inputs
In millions Fair Value Assets (Level 1) (Level 2) (Level 3)
Cash $ 5 $ 5
Money market funds 108 $ 108
US government and agency securities 518 267 251
Corporate debt (a) 916 8 555 $353
Common stock 1,153 652 501
Preferred Stock 42 42
Mutual funds 36 36
Interest in Collective Funds (b) 1,016 646 370
Limited partnerships 75 75
Other 122 14 77 31
Total $3,991 $946 $2,216 $829
(a) Corporate debt includes $106 million and $175 million of non-agency mortgage-backed securities as of December 31, 2011 and 2010, respectively.
(b) The benefit plans own commingled funds that invest in equity and fixed income securities. The commingled funds that invest in equity securities seek to mirror the performance of the
S&P 500 Index, Russell 3000 Index, Morgan Stanley Capital International ACWI X US Index, and the Dow Jones U.S. Select Real Estate Securities Index. The commingled fund that
holds fixed income securities invests in domestic investment grade securities and seeks to mimic the performance of the Barclays Aggregate Bond Index.

The PNC Financial Services Group, Inc. Form 10-K 169

The following summarizes changes in the fair value of the pension plans Level 3 assets during 2011 and 2010:

Rollforward of Pension Plan Level 3 Assets

Interest in
Common
Collective Corporate Limited Preferred
In millions Funds Debt Partnership Other Stock

January 1, 2011 $370 $353 $ 75 $31

Net realized gain on sale of investments (1) (9) (6) 3
Net unrealized gain/(loss) on assets held at end of year (19) (12) 55 (4) $(1)
Purchases 27 29 16 4 3
Sales (184) (10) (7)
Transfers into Level 3 30
Transfers (from) Level 3 (130)
December 31, 2011 $377 $ 77 $130 $27 $2

Interest in
Common
Collective Corporate Limited
In millions Funds Debt Partnerships Other

January 1, 2010 $ 57 $117 $62 $44

Net realized gain on sale of investments 37 6 4
Net unrealized gain/(loss) on assets held at end of year 99 (48) 3 (15)
Purchases, sales, issuances, and settlements (net) 214 214 4 1
Transfers into (from) Level 3 33 (3)
December 31, 2010 $370 $353 $75 $31

The following table provides information regarding our estimated future cash flows related to our various plans:

Estimated Cash Flows

Postretirement Benefits
Reduction in PNC
Benefit Payments
Qualified Nonqualified Gross PNC Due to Medicare
In millions Pension Pension Benefit Payments Part D Subsidy
Estimated 2012 employer contributions $30 $36 $2
Estimated future benefit payments
2012 $ 251 $30 $36 $2
2013 263 30 33 2
2014 274 29 34 2
2015 282 27 34 2
2016 288 26 33 2
2017-2021 1,578 108 156 8

The qualified pension plan contributions are deposited into the Trust, and the qualified pension plan benefit payments are paid
from the Trust. Although the plan is underfunded as of December 31, 2011, PNCs required qualified pension contribution for 2012
is expected to be zero based on the funding calculations under the Pension Protection Act of 2006. For the other plans, total
contributions and the benefit payments are the same and represent expected benefit amounts, which are paid from general assets.
Postretirement benefits are net of participant contributions.

170 The PNC Financial Services Group, Inc. Form 10-K

The components of net periodic benefit cost/(income) and other amounts recognized in other comprehensive income were as
follows.

Components of Net Periodic Benefit Cost

Qualified Pension Plan Nonqualified Pension Plan Postretirement Benefits
Year ended December 31 in millions 2011 2010 2009 2011 2010 2009 2011 2010 2009
Net periodic cost consists of:
Service cost $ 94 $ 102 $ 90 $ 4 $ 3 $ 2 $ 7 $ 5 $ 4
Interest cost 196 203 206 13 14 15 19 20 21
Expected return on plan assets (298) (285) (260)
Amortization of prior service cost (8) (8) (2) (3) (3) (5)
Amortization of actuarial losses 19 34 83 5 3 1
Net periodic cost 3 46 117 22 20 18 23 22 20
Other changes in plan assets and benefit obligations recognized in other
comprehensive income:
Current year prior service cost/(credit) (43) 2
Amortization of prior service credit 8 8 2 3 3 5
Current year actuarial loss/(gain) 579 (99) (263) 15 11 24 (1) 21 21
Amortization of actuarial (loss) (19) (34) (83) (5) (3) (1) (1)
Total recognized in OCI 568 (125) (387) 10 8 25 1 24 26
Total recognized in net periodic cost and OCI $ 571 $ (79) $(270) $32 $28 $43 $24 $46 $46

The weighted-average assumptions used (as of the beginning The weighted-average assumptions used (as of the end of each
of each year) to determine net periodic costs shown above year) to determine year-end obligations for pension and
were as follows: postretirement benefits were as follows:

Net Periodic Costs Assumptions Other Pension Assumptions

Net Periodic Cost Determination At December 31
Year ended December 31 2011 2010 2009 Year ended December 31 2011 2010
Discount rate Discount rate
Qualified pension 5.20% 5.75% 6.05% Qualified pension 4.60% 5.20%
Nonqualified pension 4.80 5.15 5.90 Nonqualified pension 4.20 4.80
Postretirement benefits 5.00 5.40 5.95 Postretirement benefits 4.40 5.00
Rate of compensation increase (average) 4.00 4.00 4.00 Rate of compensation increase (average) 4.00 4.00
Assumed health care cost trend rate Assumed health care cost trend rate
Initial trend 8.00 8.50 9.00 Initial trend 8.00 8.00
Ultimate trend 5.00 5.00 5.00 Ultimate trend 5.00 5.00
Year ultimate reached 2019 2014 2014 Year ultimate reached 2019 2019
Expected long-term return on plan assets 7.75 8.00 8.25
The discount rates are determined independently for each plan by
comparing the expected future benefits that will be paid under each
plan with yields available on high quality corporate bonds of similar
duration. For this analysis, 10% of bonds with the highest yields and
40% with the lowest yields were removed from the bond universe.

The expected return on plan assets is a long-term assumption

established by considering historical and anticipated returns of
the asset classes invested in by the pension plan and the
allocation strategy currently in place among those classes. We
review this assumption at each measurement date and adjust it
if warranted. This assumption remains at 7.75% for
determining 2012 net periodic cost.

The PNC Financial Services Group, Inc. Form 10-K 171

The health care cost trend rate assumptions shown in the
preceding tables relate only to the postretirement benefit
plans. A one-percentage-point change in assumed health care
cost trend rates would have the following effects:
Effect of One Percent Change in Assumed Health Care Cost
Year ended December 31, 2011
In millions Increase
Effect on total service and interest cost
Effect on year-end benefit obligation
Unamortized actuarial gains and losses and prior service costs
and credits are recognized in AOCI each December 31, with
amortization of these amounts through net periodic benefit
cost. The estimated amounts that will be amortized in 2012 are
as follows:
Estimated Amortization of Unamortized Actuarial Gains and
Losses 2012
2012 Estimate
Year ended December 31 Qualified Nonqualified
In millions Pension Pension
Prior service (credit) $ (8)
Net actuarial loss 88 $6
Total $80 $6
DEFINED CONTRIBUTION PLANS
We have a qualified defined contribution plan that covers all
eligible PNC employees. Effective January 1, 2010, the
employer matching contribution under the PNC Incentive
Savings Plan was reduced from a maximum of 6% to 4% of a
participants eligible compensation. Certain changes to the
plans eligibility and vesting requirements also became
effective January 1, 2010. Employees hired prior to January 1,
2010 became 100% vested immediately, while employees
hired on or after January 1, 2010 become vested 100% after
three years of service. Employee benefits expense related to
defined contribution plans was $105 million in 2011, $90
million in 2010 and $136 million in 2009. We measure
employee benefits expense as the fair value of the shares and
cash contributed to the plan by PNC.
Under the PNC Incentive Savings Plan, employee
contributions up to 4% of eligible compensation as defined by
the plan are matched 100%, subject to Code limitations. PNC
will contribute a minimum matching contribution of $2,000 to
employees who contribute at least 4% of eligible
compensation every pay period during the year . This amount
is prorated for certain employees, including part-time
employees and those who are eligible for the company match
for less than a full year. Additionally, for participants who
meet the annual deferral limit or the annual compensation
limit before the end of a calendar year, PNC makes a true-up
matching contribution to ensure that such participants receive
the full company match available. The plan is a 401(k) Plan
172 The PNC Financial Services Group, Inc. Form 10-K
and includes a stock ownership (ESOP) feature. Employee
contributions are invested in a number of mutual fund
investment options available under the plan at the direction of
the employee. Although employees were also historically
permitted to direct the investment of their contributions into
the PNC common stock fund, this fund was frozen to future
investments of such contributions effective January 1, 2010.
Decrease All shares of PNC common stock held by the plan are part of
$ 1 $ (1)
the ESOP. Employee contributions to the plan for 2010 and
2009 were matched primarily by shares of PNC common
$13 $(13)
stock held in treasury or reserve, except in the case of those
participants who have exercised their diversification election
rights to have their matching portion in other investments
available within the plan. Effective January 1, 2011, employer
matching contributions are now made in cash.
Prior to July 1, 2010, PNC sponsored a separate qualified
defined contribution plan that covered substantially all
US-based GIS employees not covered by our plan. The plan
was a 401(k) plan and included an ESOP feature. Under this
plan, employee contributions of up to 6% of eligible
compensation as defined by the plan were eligible to be
Postretirement matched annually based on GIS performance levels. Employee
Benefits
benefits expense for this plan was $6 million in 2010, and $8
$(3)
million in 2009. We measured employee benefits expense as
2 the fair value of the shares and cash contributed to the plan.
$(1) As described in Note 2 Divestiture, on July 1, 2010 we sold
GIS. Plan assets of $239 million were transferred to The Bank
of New York Mellon Corporation 401(k) Savings Plan on that
date. Prior to July 1, 2010, the Plan continued to operate under
the provisions of the original plan document, as amended.
We also maintain a nonqualified supplemental savings plan
for certain employees, known as The PNC Supplemental
Incentive Savings Plan. Effective January 1, 2010, the
employer match was discontinued in that plan. Effective
January 1, 2012, the Supplemental Incentive Savings Plan was
frozen to new participants and for any deferrals of amounts
earned on or after such date. It was replaced by a new plan
called the Deferred Compensation and Incentive Plan.
NOTE 15 STOCK BASED COMPENSATION PLANS
We have long-term incentive award plans (Incentive Plans)
that provide for the granting of incentive stock options,
nonqualified stock options, stock appreciation rights, incentive
shares/performance units, restricted stock, restricted share
units, other share-based awards and dollar-denominated
awards to executives and, other than incentive stock options,
to non-employee directors. Certain Incentive Plan awards may
be paid in stock, cash or a combination of stock and cash. We
typically grant a substantial portion of our stock-based
compensation awards during the first quarter of the year. As of
December 31, 2011, no stock appreciation rights were
outstanding. Total compensation expense recognized related
to all share-based payment arrangements during 2011, 2010
and 2009 was approximately $103 million, $107 million and
$93 million, respectively.
NONQUALIFIED STOCK OPTIONS We used the following assumptions in the option pricing
Options are granted at exercise prices not less than the market models to determine 2011, 2010 and 2009 option expense:
value of common stock on the grant date. Generally, options The risk-free interest rate is based on the US
become exercisable in installments after the grant date. No Treasury yield curve,
option may be exercisable after 10 years from its grant date. The dividend yield typically represents average
Payment of the option exercise price may be in cash or by yields over the previous three-year period, however
surrendering shares of common stock at market value on the starting with the grants made after the first quarter of
exercise date. The exercise price may be paid in previously 2009, we used a yield indicative of our currently
owned shares. reduced dividend rate,
Volatility is measured using the fluctuation in
Generally, options granted under the Incentive Plans vest month-end closing stock prices over a period which
ratably over a three-year period as long as the grantee remains corresponds with the average expected option life,
an employee or, in certain cases, retires from PNC. In but in no case less than a five-year period, and
accordance with FASB ASC 718, Stock Compensation, we The expected life assumption represents the period of
recognize compensation expense for options granted to time that options granted are expected to be
retirement-eligible employees during the first twelve months outstanding and is based on a weighted-average of
subsequent to the grant, in accordance with the service period historical option activity.
provisions of the options.
Option Pricing Assumptions
OPTION PRICING ASSUMPTIONS Weighted-average for the
year ended December 31 2011 2010 2009
For purposes of computing stock option expense, we
estimated the fair value of stock options primarily by using the Risk-free interest rate 2.8% 2.9% 1.9%
Black-Scholes option-pricing model. Option pricing models Dividend yield 0.6 0.7 3.5
require the use of numerous assumptions, many of which are Volatility 34.7 32.7 27.3
subjective. Expected life 5.9 yrs. 6.0 yrs. 5.6 yrs.
Grant date fair value $ 22.82 $ 19.54 $ 5.73

Stock Option Rollforward 2011

PNC Options
Converted From
PNC National City Total
Weighted-
Weighted- Weighted- Weighted- Average
Average Average Average Remaining Aggregate
Year ended December 31, 2011 Exercise Exercise Exercise Contractual Intrinsic
In thousands, except weighted-average data Shares Price Shares Price Shares Price Life Value
Outstanding, January 1 19,825 $56.36 1,214 $678.09 21,039 $ 92.25
Granted 833 64.04 833 64.04
Exercised (769) 53.78 (769) 53.78
Cancelled (2,399) 73.58 (265) 655.54 (2,664) 131.52
Outstanding, December 31 17,490 $54.48 949 $684.40 18,439 $ 86.90 5.3 years $126,535
Vested and expected to vest, December 31 (a) 17,311 $54.55 949 $684.40 18,260 $ 87.29 5.3 years $124,339
Exercisable, December 31 11,388 $57.87 949 $684.40 12,337 $106.08 4.2 years $ 53,567
(a) Adjusted for estimated forfeitures on unvested options.

To determine stock-based compensation expense, the grant-
date fair value is applied to the options granted with a
reduction for estimated forfeitures. We recognize
compensation expense for stock options on a straight-line
basis over the pro rata vesting period.
At December 31, 2010 and 2009, options for 13,397,000 and
12,722,000 shares of common stock, respectively, were
exercisable at a weighted-average price of $118.21 and
$132.52, respectively. The total intrinsic value of options
exercised during 2011, 2010 and 2009 was $4 million, $5
million and $1 million, respectively.
Cash received from option exercises under all Incentive Plans
for 2011, 2010 and 2009 was approximately $41 million, $15
million and $5 million, respectively. The actual tax benefit
realized for tax deduction purposes from option exercises
under all Incentive Plans for 2011, 2010 and 2009 was
approximately $14 million, $5 million and $2 million,
respectively.

The PNC Financial Services Group, Inc. Form 10-K 173

There were no options granted in excess of market value in (which are payable solely in stock) have a service condition,
2011, 2010 or 2009. Shares of common stock available during an internal risk-related performance condition, and an external
the next year for the granting of options and other awards market condition. Satisfaction of the performance condition is
under the Incentive Plans were 33,775,543 at December 31, based on four independent one-year performance periods.
2011. Total shares of PNC common stock authorized for
future issuance under equity compensation plans totaled The weighted-average grant-date fair value of incentive/
35,304,422 shares at December 31, 2011, which includes performance unit share awards and restricted stock/unit
shares available for issuance under the Incentive Plans and the awards granted in 2011, 2010 and 2009 was $63.25, $54.59
Employee Stock Purchase Plan (ESPP) as described below. and $41.16 per share, respectively. We recognize
compensation expense for such awards ratably over the
During 2011, we issued 731,336 shares from treasury stock in corresponding vesting and/or performance periods for each
connection with stock option exercise activity. As with past type of program.
exercise activity, we currently intend to utilize primarily
treasury stock for any future stock option exercises. Nonvested Incentive/Performance Unit Share Awards and
Restricted Stock/Unit Awards Rollforward
Awards granted to non-employee directors in 2011, 2010 and
Weighted- Nonvested Weighted-
2009 include 27,090, 29,040, and 39,552 deferred stock units, Nonvested Average Restricted Average
respectively, awarded under the Outside Directors Deferred Incentive/ Grant Stock/ Grant
Performance Date Fair Unit Date Fair
Stock Unit Plan. A deferred stock unit is a phantom share of Shares in thousands Unit Shares Value Shares Value
our common stock, which requires liability accounting December 31, 2010 363 $56.40 2,250 $49.95
treatment until such awards are paid to the participants as Granted 623 64.21 1,059 62.68
cash. As there are no vesting or service requirements on these
Vested (156) 59.54 (706) 51.27
awards, total compensation expense is recognized in full on
Forfeited (91) 52.24
awarded deferred stock units on the date of grant.
December 31, 2011 830 $61.68 2,512 $54.87
INCENTIVE/PERFORMANCE UNIT SHARE AWARDS AND
RESTRICTED STOCK/UNIT AWARDS In the chart above, the unit shares and related weighted-
The fair value of nonvested incentive/performance unit share average grant-date fair value of the incentive/performance
awards and restricted stock/unit awards is initially determined awards exclude the effect of dividends on the underlying
based on prices not less than the market value of our common shares, as those dividends will be paid in cash.
stock price on the date of grant. The value of certain incentive/
performance unit share awards is subsequently remeasured At December 31, 2011, there was $61 million of unrecognized
based on the achievement of one or more financial and other deferred compensation expense related to nonvested share-
performance goals generally over a three-year period. The based compensation arrangements granted under the Incentive
Personnel and Compensation Committee of the Board of Plans. This cost is expected to be recognized as expense over a
Directors approves the final award payout with respect to period of no longer than five years. The total fair value of
incentive/performance unit share awards. Restricted stock/unit incentive/performance unit share and restricted stock/unit
awards have various vesting periods generally ranging from awards vested during 2011, 2010 and 2009 was approximately
36 months to 60 months. $52 million, $39 million and $47 million, respectively.

Beginning in 2011, we incorporated two changes to certain LIABILITY AWARDS

awards under our existing long-term incentive compensation
programs. First, for certain grants of incentive performance
units, the future payout amount will be subject to a negative
annual adjustment if PNC fails to meet certain risk-related
performance metrics. This adjustment is in addition to the
existing financial performance metrics relative to our peers.
These grants have a three-year performance period and are
payable in either stock or a combination of stock and cash.
Second, performance-based restricted share units
(performance RSUs) were granted in 2011 to certain of our
executives in lieu of stock options. These performance RSUs
We grant annually cash-payable restricted share units to
certain executives. The grants were made primarily as part of
an annual bonus incentive deferral plan. While there are time-
based and service-related vesting criteria, there are no market
or performance criteria associated with these awards.
Compensation expense recognized related to these awards was
recorded in prior periods as part of annual cash bonus criteria.
As of December 31, 2011, there were 753,203 of these cash-
payable restricted share units outstanding.

174 The PNC Financial Services Group, Inc. Form 10-K

A summary of all nonvested, cash-payable restricted share
unit activity follows:
Nonvested Cash-Payable Restricted Share Units
Rollforward
Nonvested
Cash-
Payable
Restricted
Share
In thousands Units
Outstanding at December 31, 2010 1,112
Granted 525
Vested (547)
Forfeited (38)
Outstanding at December 31, 2011 1,052
The total of all share-based liability awards paid out during
2011, 2010 and 2009 was approximately $34 million, $9
million and $2 million, respectively.
EMPLOYEE STOCK PURCHASE PLAN
As of December 31, 2011, our ESPP had approximately
1.5 million shares available for issuance. Full-time employees
with six months and part-time employees with 12 months of
continuous employment with a participating PNC entity are
eligible to participate in the ESPP at the commencement of the
next six-month offering period. Eligible participants may
purchase our common stock at 95% of the fair market value
on the last day of each six-month offering period. No charge
to earnings is recorded with respect to the ESPP.
Employee Stock Purchase Plan Summary
Year ended December 31 Shares Issued Purchase Price Per Share
2011 165,408 $56.63 and $54.79
2010 147,177 53.68 and 57.68
2009 158,536 36.87 and 50.15
BLACKROCK LTIP AND EXCHANGE AGREEMENTS
BlackRock adopted the 2002 LTIP program to help attract and
retain qualified professionals. At that time, PNC agreed to
transfer up to 4 million shares of BlackRock common stock to
partially fund a portion of the 2002 LTIP program and future
LTIP programs approved by BlackRocks board of directors,
subject to certain conditions and limitations. As of
December 31, 2010, approximately 1.1 million shares of
BlackRock common stock had been transferred by PNC and
distributed to LTIP participants in connection with the 2002
LTIP program.
In 2007, BlackRock also granted awards under an LTIP
program. BlackRock achieved the earnings performance goals
required by these awards and the awards vested on
September 29, 2011. On that date, PNC transferred
approximately 1.3 million shares of BlackRock Series C
Preferred Stock to BlackRock to satisfy a portion of our LTIP
obligation. Upon transfer, Other assets and Other liabilities on
our Consolidated Balance Sheet were reduced by $172
million, representing the fair value of the shares transferred.
At December 31, 2011, approximately 1.5 million shares of
BlackRock Series C Preferred Stock were available to fund a
portion of awards under future BlackRock LTIP programs.
Aggregate
Intrinsic As previously reported, PNC entered into an Exchange
Value
Agreement with BlackRock on December 26, 2008. Also on
December 26, 2008, BlackRock entered into an Exchange
Agreement with Merrill Lynch in anticipation of the
consummation of the merger of Bank of America Corporation
and Merrill Lynch that occurred on January 1, 2009. The PNC
$60,688 and Merrill Lynch Exchange Agreements restructured PNCs
and Merrill Lynchs respective ownership of BlackRock
common and preferred equity. The transactions that resulted
from our agreement restructured PNCs ownership of
BlackRock equity without altering, to any meaningful extent,
PNCs economic interest in BlackRock. PNC continues to be
subject to the limitations on its voting rights in its existing
agreements with BlackRock.
The exchange contemplated by these agreements was
completed on February 27, 2009. On that date, PNCs
obligation to deliver its BlackRock common shares to
BlackRock under LTIP programs was also replaced with an
obligation to deliver shares of BlackRocks Series C Preferred
Stock as part of the exchange agreement. PNC acquired
2.9 million shares of Series C Preferred Stock from
BlackRock in exchange for common shares.
PNCs noninterest income in 2009 included a pretax gain of
$98 million related to our BlackRock LTIP shares obligation.
This gain represented the mark-to-market adjustment related
to our remaining BlackRock LTIP common shares obligation
and resulted from the decrease in the market value of
BlackRock common shares in 2009 prior to the February 27,
2009 exchange.
PNC accounts for its BlackRock Series C Preferred Stock at
fair value, which offsets the impact of marking-to-market the
obligation to deliver these shares to BlackRock. The fair value
of the BlackRock Series C Preferred Stock is included on our
Consolidated Balance Sheet in the caption Other assets.
Additional information regarding the valuation of the
BlackRock Series C Preferred Stock is included in Note 8 Fair
Value.
NOTE 16 FINANCIAL DERIVATIVES
We use derivative financial instruments (derivatives)
primarily to help manage exposure to interest rate, market and
credit risk and reduce the effects that changes in interest rates
may have on net income, fair value of assets and liabilities,
and cash flows. We also enter into derivatives with customers
to facilitate their risk management activities.
The PNC Financial Services Group, Inc. Form 10-K 175
Derivatives represent contracts between parties that usually
require little or no initial net investment and result in one party
delivering cash or another type of asset to the other party
based on a notional amount and an underlying as specified in
the contract. Derivative transactions are often measured in
terms of notional amount, but this amount is generally not
exchanged and it is not recorded on the balance sheet. The
notional amount is the basis to which the underlying is applied
to determine required payments under the derivative contract.
The underlying is a referenced interest rate (commonly
LIBOR), security price, credit spread or other index.
Residential and commercial real estate loan commitments
associated with loans to be sold also qualify as derivative
instruments.
All derivatives are carried on our Consolidated Balance Sheet
at fair value. Derivative balances are presented on a net basis
taking into consideration the effects of legally enforceable
master netting agreements. Cash collateral exchanged with
counterparties is also netted against the applicable derivative
fair values.
Further discussion on how derivatives are accounted for is
included in Note 1 Accounting Policies.
DERIVATIVES DESIGNATED IN HEDGE RELATIONSHIPS
Certain derivatives used to manage interest rate risk as part of
our asset and liability risk management activities are
designated as accounting hedges under GAAP. Derivatives
hedging the risks associated with changes in the fair value of
assets or liabilities are considered fair value hedges,
derivatives hedging the variability of expected future cash
flows are considered cash flow hedges, and derivatives
hedging a net investment in a foreign subsidiary are
considered net investment hedges. Designating derivatives as
accounting hedges allows for gains and losses on those
derivatives, to the extent effective, to be recognized in the
income statement in the same period the hedged items affect
earnings.
Fair Value Hedges
We enter into receive-fixed, pay-variable interest rate swaps to
hedge changes in the fair value of outstanding fixed-rate debt
and borrowings caused by fluctuations in market interest rates.
The specific products hedged may include bank notes, Federal
Home Loan Bank borrowings, and senior and subordinated
debt. We also enter into pay-fixed, receive-variable interest
rate swaps, and zero-coupon swaps to hedge changes in the
fair value of fixed rate and zero-coupon investment securities
caused by fluctuations in market interest rates. The specific
products hedged include US Treasury, government agency and
other debt securities. For these hedge relationships, we use
statistical regression analysis to assess hedge effectiveness at
both the inception of the hedge relationship and on an ongoing
basis. There were no components of derivative gains or losses
excluded from the assessment of hedge effectiveness.
176 The PNC Financial Services Group, Inc. Form 10-K
The ineffective portion of the change in value of our fair value
hedge derivatives resulted in net losses of $17 million for
2011 compared with net losses of $31 million for 2010 and net
losses of $43 million for 2009.
Cash Flow Hedges
We enter into receive-fixed, pay-variable interest rate swaps to
modify the interest rate characteristics of designated
commercial loan interest payments from variable to fixed in
order to reduce the impact of changes in future cash flows due
to market interest rate changes. For these cash flow hedges,
any changes in the fair value of the derivatives that are
effective in offsetting changes in the forecasted interest cash
flows are recorded in Accumulated other comprehensive
income and are reclassified to interest income in conjunction
with the recognition of interest receipts on the loans. In the 12
months that follow December 31, 2011, we expect to
reclassify from the amount currently reported in Accumulated
other comprehensive income net derivative gains of $382
million pretax, or $248 million after-tax, in association with
interest receipts on the hedged loans. This amount could differ
from amounts actually recognized due to changes in interest
rates, hedge de-designations, and the addition of other hedges
subsequent to December 31, 2011. The maximum length of
time over which forecasted loan cash flows are hedged is 9
years. We use statistical regression analysis to assess the
effectiveness of these hedge relationships at both the inception
of the hedge relationship and on an ongoing basis.
We also periodically enter into forward purchase and sale
contracts to hedge the variability of the consideration that will
be paid or received related to the purchase or sale of
investment securities. The forecasted purchase or sale is
consummated upon gross settlement of the forward contract
itself. As a result, hedge ineffectiveness, if any, is typically
minimal. Gains and losses on these forward contracts are
recorded in Accumulated other comprehensive income and are
recognized in earnings when the hedged cash flows affect
earnings. In the 12 months that follow December 31, 2011, we
expect to reclassify from the amount currently reported in
Accumulated other comprehensive loss, net derivative gains
of $72 million pretax, or $47 million after-tax, as adjustments
of yield on investment securities. The maximum length of
time we are hedging forecasted purchases is four months.
There were no amounts in Accumulated other comprehensive
income related to the forecasted sale of securities at
December 31, 2011.
There were no components of derivative gains or losses
excluded from the assessment of hedge effectiveness related
to either cash flow hedge strategy.
During 2011 and 2010, there were no gains or losses from
cash flow hedge derivatives reclassified to earnings because it
became probable that the original forecasted transaction would
not occur. The amount of cash flow hedge ineffectiveness
recognized in income for 2011 and 2010 was not material to
PNCs results of operations.
Net Investment Hedges
We enter into foreign currency forward contracts to hedge
non-U.S. Dollar (USD) net investments in foreign subsidiaries
against adverse changes in foreign exchange rates. We assess
whether the hedging relationship is highly effective in
achieving offsetting changes in the value of the hedge and
hedged item by qualitatively verifying the critical terms of the
hedge and hedged item match at the inception of the hedging
relationship and on an ongoing basis. There were no
components of derivative gains or losses excluded from the
assessment of the hedge effectiveness.
At December 31, 2011, there was no net investment hedge
ineffectiveness and the loss recognized in Accumulated other
comprehensive income was less than $1 million to PNCs
results of operations.
Further detail regarding the notional amounts, fair values and
gains and losses recognized related to derivatives used in fair
value and cash flow hedge strategies is presented in the tables
that follow.
DERIVATIVES NOT DESIGNATED IN HEDGE RELATIONSHIPS
We also enter into derivatives that are not designated as
accounting hedges under GAAP.
The majority of these derivatives are used to manage risk
related to residential and commercial mortgage banking
activities and are considered economic hedges. Although these
derivatives are used to hedge risk, they are not designated as
accounting hedges because the contracts they are hedging are
typically also carried at fair value on the balance sheet,
resulting in symmetrical accounting treatment for both the
hedging instrument and the hedged item.
Our residential mortgage banking activities consist of
originating, selling and servicing mortgage loans. Residential
mortgage loans that will be sold in the secondary market, and
the related loan commitments, which are considered
derivatives, are accounted for at fair value. Changes in the fair
value of the loans and commitments due to interest rate risk
are hedged with forward loan sale contracts as well as US
Treasury and Eurodollar futures and options. Gains and losses
on the loans and commitments held for sale and the
derivatives used to economically hedge them are included in
residential mortgage noninterest income on the Consolidated
Income Statement.
We typically retain the servicing rights related to residential
mortgage loans that we sell. Residential mortgage servicing
rights are accounted for at fair value with changes in fair value
influenced primarily by changes in interest rates. Derivatives
used to hedge the fair value of residential mortgage servicing
rights include interest rate futures, swaps, options (including
caps, floors, and swaptions), and forward contracts to
purchase mortgage-backed securities. Gains and losses on
residential mortgage servicing rights and the related
derivatives used for hedging are included in Residential
mortgage noninterest income.
Certain commercial mortgage loans are also sold into the
secondary market as part of our commercial mortgage banking
activities and the loans, and the related loan commitments,
which are considered derivatives, are accounted for at fair
value. Derivatives used to economically hedge these loans and
commitments from changes in fair value due to interest rate
risk and credit risk include forward loan sale contracts,
interest rate swaps, and credit default swaps. Gains and losses
on the commitments, loans and derivatives are included in
Other noninterest income.
The residential and commercial loan commitments associated
with loans to be sold which are accounted for as derivatives
are valued based on the estimated fair value of the underlying
loan and the probability that the loan will fund within the
terms of the commitment. The fair value also takes into
account the fair value of the embedded servicing right.
We offer derivatives to our customers in connection with their
risk management needs. These derivatives primarily consist of
interest rate swaps, interest rate caps, floors, swaptions,
foreign exchange contracts, and equity contracts. We
primarily manage our market risk exposure from customer
transactions by entering into a variety of hedging transactions
with third-party dealers. Gains and losses on customer-related
derivatives are included in Other noninterest income.
The derivatives portfolio also includes derivatives used for
other risk management activities. These derivatives are
entered into based on stated risk management objectives.
This segment of the portfolio includes credit default swaps
(CDS) used to mitigate the risk of economic loss on a portion
of our loan exposure. We also sell loss protection to mitigate
the net premium cost and the impact of mark-to-market
accounting on CDS purchases to hedge the loan portfolio. The
fair values of these derivatives typically are based on related
credit spreads. Gains and losses on the derivatives entered into
for other risk management are included in Other noninterest
income.
Included in the customer, mortgage banking risk management,
and other risk management portfolios are written interest-rate
caps and floors entered into with customers and for risk
management purposes. We receive an upfront premium from
the counterparty and are obligated to make payments to the
counterparty if the underlying market interest rate rises above
or falls below a certain level designated in the contract. At
December 31, 2011, the fair value of the written caps and
floors liability on our Consolidated Balance Sheet was $6
million compared with $15 million at December 31, 2010. Our
ultimate obligation under written options is based on future
market conditions and is only quantifiable at settlement.
The PNC Financial Services Group, Inc. Form 10-K 177
Further detail regarding the derivatives not designated in
hedging relationships is presented in the tables that follow.
DERIVATIVE COUNTERPARTY CREDIT RISK
By entering into derivative contracts we are exposed to credit
risk. We seek to minimize credit risk through internal credit
approvals, limits, monitoring procedures, executing master
netting agreements and collateral requirements. We generally
enter into transactions with counterparties that carry high
quality credit ratings. Nonperformance risk including credit
risk is included in the determination of the estimated net fair
value.
We generally have established agreements with our major
derivative dealer counterparties that provide for exchanges of
marketable securities or cash to collateralize either partys
positions. At December 31, 2011, we held cash, US
government securities and mortgage-backed securities totaling
$1.2 billion under these agreements. We pledged cash and US
government securities of $851 million under these
agreements. To the extent not netted against derivative fair
values under a master netting agreement, the receivable for
cash pledged is included in Other assets and the obligation for
cash held is included in Other borrowed funds on our
Consolidated Balance Sheet.
The credit risk associated with derivatives executed with
customers is essentially the same as that involved in extending
loans and is subject to normal credit policies. We may obtain
collateral based on our assessment of the customers credit
quality.
178 The PNC Financial Services Group, Inc. Form 10-K
We periodically enter into risk participation agreements to
share some of the credit exposure with other counterparties
related to interest rate derivative contracts or to take on credit
exposure to generate revenue. We will make/receive payments
under these agreements if a customer defaults on its obligation
to perform under certain derivative swap contracts. Risk
participation agreements are included in the derivatives table
that follows. Our exposure related to risk participations where
we sold protection is discussed in the Credit Derivatives
section below.
CONTINGENT FEATURES
Some of PNCs derivative instruments contain provisions that
require PNCs debt to maintain an investment grade credit
rating from each of the major credit rating agencies. If PNCs
debt ratings were to fall below investment grade, it would be
in violation of these provisions, and the counterparties to the
derivative instruments could request immediate payment or
demand immediate and ongoing full overnight
collateralization on derivative instruments in net liability
positions.
The aggregate fair value of all derivative instruments with
credit-risk-related contingent features that were in a net
liability position on December 31, 2011 was $1.1 billion for
which PNC had posted collateral of $845 million in the
normal course of business. The maximum amount of collateral
PNC would have been required to post if the credit-risk-
related contingent features underlying these agreements had
been triggered on December 31, 2011, would be an additional
$271 million.
Derivatives Total Notional or Contractual Amounts and Estimated Net Fair Values

Asset Derivatives Liability Derivatives

December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010
Notional/ Notional/ Notional/ Notional/
Contract Fair Contract Fair Contract Fair Contract Fair
In millions Amount Value (a) Amount Value (a) Amount Value (b) Amount Value (b)
Derivatives designated as hedging instruments
under GAAP
Interest rate contracts:
Cash flow hedges $ 16,542 $ 572 $ 13,635 $ 377 $ 93 $ 3,167 $ 53
Fair value hedges 10,476 1,316 9,878 878 1,797 $ 116 1,594 32
Foreign exchange contracts:
Net investment hedge 326
Total derivatives designated as hedging instruments $ 27,018 $1,888 $ 23,513 $1,255 $ 2,216 $ 116 $ 4,761 $ 85
Derivatives not designated as hedging instruments
under GAAP
Derivatives used for residential mortgage banking
activities:
Residential mortgage servicing
Interest rate contracts $122,395 $3,390 $112,236 $1,490 $ 63,226 $2,854 $ 66,476 $1,419
Loan sales
Interest rate contracts 7,394 68 11,765 119 3,976 39 3,585 31
Subtotal $129,789 $3,458 $124,001 $1,609 $ 67,202 $2,893 $ 70,061 $1,450
Derivatives used for commercial mortgage banking
activities:
Interest rate contracts $ 1,476 $ 54 $ 1,159 $ 75 $ 1,149 $ 80 $ 1,813 $ 111
Credit contracts:
Credit default swaps 95 5 210 8
Subtotal $ 1,571 $ 59 $ 1,369 $ 83 $ 1,149 $ 80 $ 1,813 $ 111
Derivatives used for customer-related activities:
Interest rate contracts $ 73,751 $3,804 $ 54,060 $2,611 $ 68,981 $3,943 $ 49,619 $2,703
Foreign exchange contracts 6,088 231 3,659 149 5,832 222 4,254 155
Equity contracts 118 5 195 16 66 8 139 19
Credit contracts:
Risk participation agreements 1,691 6 1,371 5 1,568 5 1,367 2
Subtotal $ 81,648 $4,046 $ 59,285 $2,781 $ 76,447 $4,178 $ 55,379 $2,879
Derivatives used for other risk management activities:
Interest rate contracts $ 2,190 $ 6 $ 3,420 $ 20 $ 1,479 $ 39 $ 1,099 $ 9
Foreign exchange contracts 25 4 32 4
Credit contracts:
Credit default swaps 209 6 376 9 175 1
Other contracts (c) 386 296 209 396
Subtotal $ 2,399 $ 12 $ 3,796 $ 29 $ 1,890 $ 339 $ 1,515 $ 410
Total derivatives not designated as hedging
instruments $215,407 $7,575 $188,451 $4,502 $146,688 $7,490 $128,768 $4,850
Total Gross Derivatives $242,425 $9,463 $211,964 $5,757 $148,904 $7,606 $133,529 $4,935
Less: Legally enforceable master netting agreements 6,052 3,203 6,052 3,203
Less: Cash collateral 1,051 659 843 674
Total Net Derivatives $2,360 $1,895 $ 711 $1,058
(a) Included in Other Assets on our Consolidated Balance Sheet.
(b) Included in Other Liabilities on our Consolidated Balance Sheet.
(c) Includes PNCs obligation to fund a portion of certain BlackRock LTIP programs and other contracts.

The PNC Financial Services Group, Inc. Form 10-K 179

Gains (losses) on derivative instruments and related hedged items follow:

Derivatives Designated in GAAP Hedge Relationships Fair Value Hedges

December 31, 2011 December 31, 2010
Gain (Loss) Gain (Loss)
Gain on Related Gain on Related
(Loss) on Hedged (Loss) on Hedged
Derivatives Items Derivatives Items
Recognized Recognized Recognized Recognized
Year ended in Income in Income in Income in Income
In millions Hedged Items Location Amount Amount Amount Amount

Interest rate contracts US Treasury and Investment securities

Government Agencies (interest income)
Securities $(153) $ 162 $ 9 $ (14)
Interest rate contracts Other Debt Securities Investment securities
(interest income) (23) 23 (1) (1)
Interest rate contracts Federal Home Loan Borrowed funds
Bank borrowings (interest expense) (66) 64
Interest rate contracts Subordinated debt Borrowed funds
(interest expense) 214 (229) 190 (218)
Interest rate contracts Bank notes and Borrowed funds
senior debt (interest expense) 265 (276) 146 (140)
Total $ 303 $(320) $278 $(309)

Derivatives Designated in GAAP Hedge Relationships Cash Flow Hedges

Gain (Loss) on Derivatives Gain (Loss) Reclassified from Gain (Loss) Recognized in
Year ended Recognized in OCI Accumulated OCI into Income Income on Derivatives
In millions (Effective Portion) (Effective Portion) (Ineffective Portion)
Location Amount Location Amount
December 31, 2011 Interest rate contracts $805 Interest income $455 Interest income
Noninterest income 43
December 31, 2010 Interest rate contracts $948 Interest income $339 Interest income
Noninterest income 48

180 The PNC Financial Services Group, Inc. Form 10-K

Gains (losses) on derivative instruments not designated in hedge relationships:

Derivatives Not Designated as Hedging Instruments under GAAP

Year ended
December 31
In millions 2011 2010
Derivatives used for residential mortgage banking activities:
Residential mortgage servicing
Interest rate contracts $571 $440
Loan sales
Interest rate contracts 54 (81)
Gains (losses) included in residential mortgage banking activities (a) $625 $359
Derivatives used for commercial mortgage banking activities:
Interest rate contracts $ 5 $ (63)
Credit contracts 6 (22)
Gains (losses) from commercial mortgage banking activities (b) $ 11 $ (85)
Derivatives used for customer-related activities:
Interest rate contracts $ 78 $ 16
Foreign exchange contracts 104 44
Equity contracts (3) (2)
Credit contracts 2
Gains (losses) from customer-related activities (b) $181 $ 58
Derivatives used for other risk management activities:
Interest rate contracts $ (43) $ (9)
Foreign exchange contracts (2) (6)
Credit contracts (1) 4
Other contracts (c) 11 86
Gains (losses) from other risk management activities (b) $ (35) $ 75
Total gains (losses) from derivatives not designated as hedging instruments $782 $407
(a) Included in residential mortgage noninterest income.
(b) Included in other noninterest income.
(c) Relates to BlackRock LTIP and other contracts.

CREDIT DERIVATIVES
The credit derivative underlying is based on the credit risk of a specific entity, entities, or an index. As discussed above, we enter
into credit derivatives, specifically credit default swaps and risk participation agreements, as part of our commercial mortgage
banking hedging activities and for customer and other risk management purposes. Detail regarding credit default swaps and risk
participations sold follows:

Credit Default Swaps

December 31, 2011 December 31, 2010
Estimated Weighted-Average Estimated Weighted-Average
Notional Net Fair Remaining Notional Net Fair Remaining
Dollars in millions Amount Value Maturity In Years Amount Value Maturity In Years
Credit Default Swaps Sold
Single name $ 45 $ 2 1.8 $ 45 $ 4 2.8
Index traded 49 2.0 189 2 2.0
Total $ 94 $ 2 1.9 $234 $ 6 2.2
Credit Default Swaps Purchased
Single name $150 $ 5 3.8 $317 $ 2 2.6
Index traded 60 4 37.2 210 8 38.8
Total $210 $ 9 13.3 $527 $10 17.0
Total $304 $11 9.8 $761 $16 12.5

The PNC Financial Services Group, Inc. Form 10-K 181

The notional amount of these credit default swaps by credit Risk Participation Agreements
rating follows: We have sold risk participation agreements with terms ranging
from less than 1 year to 25 years. We will be required to make
Credit Ratings of Credit Default Swaps payments under these agreements if a customer defaults on its
obligation to perform under certain derivative swap contracts
December 31 December 31
Dollars in millions 2011 2010 with third parties.
Credit Default Swaps Sold
Risk Participation Agreements Sold
Investment grade (a) $ 84 $220
Subinvestment grade (b) 10 14 Estimated Weighted-Average
Notional Net Fair Remaining
Total $ 94 $234 Dollars in millions Amount Value Maturity In Years

Credit Default Swaps Purchased December 31, 2011 $1,568 $(5) 7.5
Investment grade (a) $145 $385 December 31, 2010 $1,367 $(2) 2.0
Subinvestment grade (b) 65 142
Total $210 $527 Based on our internal risk rating process of the underlying
Total $304 $761 third parties to the swap contracts, the percentages of the
(a) Investment grade with a rating of BBB-/Baa3 or above based on published rating
exposure amount of risk participation agreements sold by
agency information. internal credit rating follow:
(b) Subinvestment grade with a rating below BBB-/Baa3 based on published rating
agency information.
Internal Credit Ratings of Risk Participation Agreements
Sold
The referenced/underlying assets for these credit default
swaps follow: December 31, December 31,
2011 2010

Referenced/Underlying Assets of Credit Default Swaps Pass (a) 99% 95%

Below pass (b) 1% 5%
Commercial
mortgage- (a) Indicates the expected risk of default is currently low.
Corporate backed (b) Indicates a higher degree of risk of default.
Debt securities Loans

December 31, 2011 59% 20% 21% Assuming all underlying swap counterparties defaulted at
December 31, 2010 62% 28% 10% December 31, 2011, the exposure from these agreements
would be $145 million based on the fair value of the
We enter into credit default swaps under which we buy loss underlying swaps, compared with $49 million at
protection from or sell loss protection to a counterparty for the December 31, 2010.
occurrence of a credit event related to a referenced entity or
index. The maximum amount we would be required to pay
under the credit default swaps in which we sold protection,
assuming all referenced underlyings experience a credit event
at a total loss, without recoveries, was $94 million at
December 31, 2011 and $234 million at December 31, 2010.

182 The PNC Financial Services Group, Inc. Form 10-K

NOTE 17 EARNINGS PER SHARE
BASIC AND DILUTED EARNINGS PER COMMON SHARE
In millions, except per share data 2011 2010 2009

Basic
Net income from continuing operations $3,071 $3,024 $2,358
Less:
Net income (loss) attributable to noncontrolling interests 15 (15) (44)
Dividends distributed to common shareholders 602 203 428
Dividends distributed to preferred shareholders 56 146 388
Dividends distributed to nonvested restricted shares 2 1 1
Preferred stock discount accretion and redemptions 2 255 56
Undistributed net income from continuing operations $2,394 $2,434 $1,529
Undistributed net income from discontinued operations 373 45
Undistributed net income $2,394 $2,807 $1,574
Percentage of undistributed income allocated to common shares (a) 99.58 % 99.64 % 99.68 %
Undistributed income from continuing operations allocated to common shares $2,384 $2,425 $1,524
Plus: common dividends 602 203 428
Net income from continuing operations attributable to basic common shares $2,986 $2,628 $1,952
Net income from discontinued operations attributable to common shares 372 45
Net income attributable to basic common shares $2,986 $3,000 $1,997
Basic weighted-average common shares outstanding 524 517 454
Basic earnings per common share from continuing operations $ 5.70 $ 5.08 $ 4.30
Basic earnings per common share from discontinued operations .72 0.10
Basic earnings per common share $ 5.70 $ 5.80 $ 4.40
Diluted
Net income from continuing operations attributable to basic common shares $2,986 $2,628 $1,952
Less: BlackRock common stock equivalents 19 17 15
Net income from continuing operations attributable to diluted common shares $2,967 $2,611 $1,937
Net income from discontinued operations attributable to common shares 372 45
Net income attributable to diluted common shares $2,967 $2,983 $1,982
Basic weighted-average common shares outstanding 524 517 454
Dilutive potential common shares (b) (c) 2 3 1
Diluted weighted-average common shares outstanding 526 520 455
Diluted earnings per common share from continuing operations $ 5.64 $ 5.02 $ 4.26
Diluted earnings per common share from discontinued operations .72 0.10
Diluted earnings per common share $ 5.64 $ 5.74 $ 4.36
(a) Excludes unvested shares issued for Restricted Stock plans
(b) Excludes stock options considered to be anti-dilutive 8 11 15
(c) Excludes warrants considered to be anti-dilutive 17 22 22

The PNC Financial Services Group, Inc. Form 10-K 183

NOTE 18 EQUITY
COMMON STOCK
On February 8, 2010, we raised $3.0 billion in new common
equity through the issuance of 55.6 million shares of common
stock in an underwritten offering at $54 per share. The
underwriters exercised their option to purchase an additional
8.3 million shares of common stock at the offering price of
$54 per share, totaling approximately $450 million, to cover
over-allotments. We completed this issuance on March 11,
2010.
PREFERRED STOCK
Information related to preferred stock is as follows:
Preferred Stock Issued and Outstanding
Preferred Shares
Liquidation
December 31 value per
Shares in thousands share 2011
Authorized
$1 par value 16,588 16,588
Issued and outstanding
Series B $ 40 1 1
Series K 10,000 50
Series L 100,000 2 2
Series O 100,000 10
Total issued and outstanding 63
Our Series B preferred stock is cumulative and is not
redeemable at our option. Annual dividends on Series B
preferred stock total $1.80 per share. Holders of Series B
preferred stock are entitled to 8 votes per share, which is equal
to the number of full shares of common stock into which the
Series B Preferred Stock is convertible.
Our Series K preferred stock was issued in May 2008 in
connection with our issuance of $500 million of Depositary
Shares, each representing a fractional interest in a share of the
Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock,
Series K. Dividends are payable if and when declared each
May 21 and November 21 until May 21, 2013. After that date,
dividends will be payable each 21st of August, November,
February and May. Dividends will be paid at a rate of 8.25%
prior to May 21, 2013 and at a rate of three-month LIBOR
plus 422 basis points beginning May 21, 2013. The Series K
preferred stock is redeemable at our option on or after
May 21, 2013.
Our 9.875% Fixed-to-Floating Rate Non-Cumulative
Preferred Stock, Series L was issued in connection with the
National City transaction in exchange for National Citys
Fixed-to-Floating Rate Non-Cumulative Preferred Stock,
Series F. Dividends on the Series L preferred stock are
payable if and when declared each 1st of February, May,
184 The PNC Financial Services Group, Inc. Form 10-K
August and November. Dividends will be paid at a rate of
9.875% prior to February 1, 2013 and at a rate of three-month
LIBOR plus 633 basis points beginning February 1, 2013. The
Series L is redeemable at PNCs option, subject to Federal
Reserve approval, if then applicable, on or after February 1,
2013 at a redemption price per share equal to the liquidation
preference plus any declared but unpaid dividends.
Our Series O preferred stock was issued on July 27, 2011,
when we issued one million depositary shares, each
representing a 1/100th interest in a share of our
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred
Stock, Series O for gross proceeds before commissions and
expenses of $1 billion. Dividends are payable when, as, and if
declared by our board of directors or an authorized committee
of our board, semi-annually on February 1 and August 1 of
each year until August 1, 2021 at a rate of 6.75%. After that
date, dividends will be payable on February 1, May 1,
August 1 and November 1 of each year beginning on
2010 November 1, 2021 at a rate of three-month LIBOR plus
3.678% per annum. The Series O preferred stock is
redeemable at our option on or after August 1, 2021 and at our
option within 90 days of a regulatory capital treatment event
as defined in the designations.
50 We have authorized but unissued Series H, I, J and M
preferred stock. As described in Note 13 Capital Securities of
Subsidiary Trusts and Perpetual Trust Securities, under the
53
terms of two of the hybrid capital vehicles we issued that
currently qualify as capital for regulatory purposes (the Trust
II Securities and the Trust III Securities), these Trust
Securities are automatically exchangeable into shares of PNC
preferred stock (Series I and Series J, respectively) in each
case under certain conditions relating to the capitalization or
the financial condition of PNC Bank, N.A. and upon the
direction of the Office of the Comptroller of the Currency.
The Series preferred stock of PNC REIT Corp. is also
automatically exchangeable under similar conditions into
shares of PNC Series H preferred stock.
As a part of the National City transaction, we established the
PNC Non-Cumulative Perpetual Preferred Stock, Series M,
which mirrors in all material respects the former National City
Non-Cumulative Perpetual Preferred Stock, Series E. PNC has
designated 5,751 preferred shares, liquidation value $100,000
per share, for this series. No shares have yet been issued;
however, National City issued stock purchase contracts for
5,001 shares of its Series E Preferred Stock (now replaced by
the PNC Series M as part of the National City transaction) to
the National City Preferred Capital Trust I in connection with
the issuance by that Trust of $500 million of 12.000%
Fixed-to-Floating Rate Normal Automatic Preferred Enhanced
Capital Securities (the Normal APEX Securities) in January
2008 by the Trust. It is expected that the Trust will purchase
5,001 of the Series M preferred shares pursuant to these stock
purchase contracts on December 10, 2012 or on an earlier date
and possibly as late as December 10, 2013. The Trust has
pledged the $500,100,000 principal amount of National City
8.729% Junior Subordinated Notes due 2043 held by the Trust
and their proceeds to secure this purchase obligation.
If Series M shares are issued prior to December 10, 2012, any
dividends on such shares will be calculated at a rate per
annum equal to 12.000% until December 10, 2012, and
thereafter, at a rate per annum that will be reset quarterly and
will equal three-month LIBOR for the related dividend period
plus 8.610%. Dividends will be payable if and when declared
by the Board at the dividend rate so indicated applied to the
liquidation preference per share of the Series M Preferred
Stock. The Series M is redeemable at PNCs option, subject to
Federal Reserve approval, if then applicable, on or after
December 10, 2012 at a redemption price per share equal to
the liquidation preference plus any declared but unpaid
dividends.
The replacement capital covenants with respect to the Normal
APEX Securities, our Series M shares and our 6,000,000 of
Depositary Shares (each representing 1/4000th of an interest
in a share of our 9.875% Fixed-to-Floating Rate
Non-Cumulative Preferred Stock, Series L) were terminated
on November 5, 2010 as a result of a successful consent
solicitation.
After receiving all required approvals, on February 10, 2010,
we redeemed all 75,792 shares of our Fixed Rate Cumulative
Perpetual Preferred Stock, Series N that had been issued on
December 31, 2008 to the US Treasury under the US
Treasurys Troubled Asset Relief Program (TARP) Capital
Purchase Program.
In connection with the redemption of the Series N Preferred
Stock, we accelerated the accretion of the remaining issuance
discount on the Series N Preferred Stock, recorded a
corresponding reduction in retained earnings of $250 million
during the first quarter of 2010 and paid dividends of $89
million to the US Treasury. This resulted in a noncash
reduction in net income attributable to common shareholders
and related basic and diluted earnings per share.
During 2010, PNC called its Series A, C and D cumulative
convertible preferred stock for redemption in accordance with
the terms of that stock. Effective September 10, 2010, PNC
redeemed 1,777 outstanding shares of Series A at a
redemption price of $40.00 per share. Effective October 1,
2010, PNC redeemed 18,118 outstanding shares of Series C
and 26,010 shares of Series D at a redemption price of $20.00
per share.
WARRANTS
We have outstanding 16,885,192 warrants, each to purchase
one share of PNC common stock at an exercise price of
$67.33 per share. These warrants were sold by the US
Treasury in a secondary public offering that closed on May 5,
2010 after the US Treasury exchanged its TARP Warrant
(issued on December 31, 2008 under the TARP Capital
Purchase Program in relation to the Series N preferred stock
referred to above) for 16,885,192 warrants. These warrants
expire December 31, 2018.
FORMER NATIONAL CITY WARRANTS
28,022 warrants issued by National City that converted into
warrants to purchase PNC common stock expired over the
period June 15, 2011 through July 15, 2011, and 28,023 of
such warrants expired over the period July 18, 2011 through
October 20, 2011. The strike price of these warrants was $750
per share. PNC reserved 5.0 million shares for issuance
pursuant to the warrants and has cancelled this reserve in
February 2012.
OTHER SHAREHOLDERS EQUITY MATTERS
We have a dividend reinvestment and stock purchase plan.
Holders of preferred stock and PNC common stock may
participate in the plan, which provides that additional shares
of common stock may be purchased at market value with
reinvested dividends and voluntary cash payments. Common
shares issued pursuant to this plan were: 379,459 shares in
2011, 149,088 shares in 2010 and 534,515 shares in 2009.
At December 31, 2011, we had reserved approximately
118.3 million common shares to be issued in connection with
certain stock plans and the conversion of certain debt and
equity securities.
Effective October 4, 2007, our Board of Directors approved a
stock repurchase program to purchase up to 25 million shares
of PNC common stock on the open market or in privately
negotiated transactions. A maximum of 24.710 million shares
remained available for repurchase under this program at
December 31, 2011. This program will remain in effect until
fully utilized or until modified, superseded or terminated. We
did not repurchase any shares during 2011, 2010 or 2009
under this program.
The PNC Financial Services Group, Inc. Form 10-K 185
 Pretax Tax After-tax
NOTE 19 OTHER COMPREHENSIVE INCOME
Net unrealized gains (losses) on cash flow
Details of other comprehensive income (loss) are as follows hedge derivatives
(in millions): Balance at December 31, 2008 $374
2009 activity
Pretax Tax After-tax
Decrease in net unrealized gains on cash
Net unrealized securities gains (losses)
flow hedge derivatives $ (12) $4 (8)
and net OTTI losses on debt
securities Less: net gains realized in net income 317 (117) 200
Balance at December 31, 2008 $(3,626) Net unrealized losses on cash flow hedge
derivatives (329) 121 (208)
2009 activity
Balance at December 31, 2009 166
Decrease in net unrealized losses for
non-OTTI securities $ 5,075 $(1,863) 3,212 2010 activity
Less: net gains realized in net income 550 (204) 346 Increase in net unrealized gains on cash flow
hedge derivatives 948 (347) 601
Net unrealized securities gains on
non-OTTI securities 4,525 (1,659) 2,866 Less: net gains realized in net income 387 (142) 245
Cumulative effect of adopting FASB Net unrealized gains on cash flow hedge
ASC 320-10 (174) 64 (110) derivatives 561 (205) 356
Net increase in OTTI losses on debt Balance at December 31, 2010 522
securities (1,699) 630 (1,069) 2011 activity
Less: Net OTTI losses realized in net Increase in net unrealized gains on cash flow
income (577) 214 (363) hedge derivatives 805 (294) 511
Net unrealized losses on OTTI Less: net gains realized in net income 498 (182) 316
securities (1,296) 480 (816) Net unrealized gains on cash flow hedge
Balance at December 31, 2009 (1,576) derivatives 307 (112) 195
2010 activity Balance at December 31, 2011 $717
Cumulative effect of adopting FASB
ASU 2009-17, Consolidations (20) 7 (13)
Decrease in net unrealized losses for
non-OTTI securities 1,803 (665) 1,138
Less: net gains realized in net income 426 (156) 270
Net unrealized gains on non-OTTI
securities 1,377 (509) 868
Net increase in OTTI losses on debt
securities (50) 14 (36)
Less: Net OTTI losses realized in net
income (325) 119 (206)
Net unrealized gains on OTTI securities 275 (105) 170
Balance at December 31, 2010 (551)
2011 activity
Decrease in net unrealized gains for
non-OTTI securities 1,232 (451) 781
Less: net gains realized in net income 284 (104) 180
Net unrealized gains on non-OTTI
securities 948 (347) 601
Net increase in OTTI losses on debt
securities (331) 121 (210)
Less: Net losses realized on sales of
securities (34) 12 (22)
Less: OTTI losses realized in net
income (152) 56 (96)
Net unrealized losses on OTTI
securities (145) 53 (92)
Balance at December 31, 2011 $ (42)

186 The PNC Financial Services Group, Inc. Form 10-K

 Pretax Tax After-tax
NOTE 20 INCOME TAXES
Pension and other postretirement benefit The components of income taxes from continuing operations
plan adjustments are as follows:
Balance at December 31, 2008 $(667)
2009 Activity $ 198 $(73) 125 Income Taxes from Continuing Operations
Balance at December 31, 2009 (542)
Year ended December 31
2010 Activity 260 (98) 162 In millions 2011 2010 2009

Balance at December 31, 2010 (380) Current

2011 Activity (593) 218 (375) Federal $191 $ (207) $(109)
Balance at December 31, 2011 $(755) State (33) 43 46
Other (a) Total current 158 (164) (63)
Balance at December 31, 2008 $ (30) Deferred
2009 Activity Federal 783 1,193 912
Foreign currency translation adj. $ 48 $(17) 31 State 57 8 18
BlackRock deferred tax adj. (13) (13) Total deferred 840 1,201 930
SBA I/O strip valuation adj. 3 (1) 2 Total $998 $1,037 $ 867
Total 2009 activity 51 (31) 20
Balance at December 31, 2009 (10) Significant components of deferred tax assets and liabilities
are as follows:
2010 Activity
Foreign currency translation adj. (18) 6 (12)
Deferred Tax Assets and Liabilities
BlackRock deferred tax adj. 1 1
December 31 - in millions 2011 2010
SBA I/O strip valuation adj. (2) 1 (1)
Total 2010 activity (20) 8 (12) Deferred tax assets

Balance at December 31, 2010 (22) Allowance for loan and lease losses $1,896 $1,912
2011 Activity Net unrealized securities losses 25 320
Foreign currency translation adj. (4) 1 (3) Compensation and benefits 677 595
Total 2011 activity (4) 1 (3) Unrealized losses on loans 7 402
Balance at December 31, 2011 $ (25) Loss and credit carryforward 243 145
(a) Consists of foreign currency translation adjustments, deferred tax adjustments on Other 1,030 1,422
BlackRocks other comprehensive income, and for 2010 and 2009, interest-only Total gross deferred tax assets 3,878 4,796
strip valuation adjustments.
Valuation allowance (14) (21)
The accumulated balances related to each component of other Total deferred tax assets 3,864 4,775
comprehensive income (loss) are as follows: Deferred tax liabilities
Leasing 1,150 1,153
Accumulated Other Comprehensive Income (Loss) Goodwill and intangibles 431 399
Components Mortgage servicing rights 162 355
December 31 - In millions 2011 2010 BlackRock basis difference 1,736 1,750
Net unrealized securities gains $ 696 $ 95 Other 1,523 1,277
OTTI losses on debt securities (738) (646) Total deferred tax liabilities 5,002 4,934
Net unrealized gains on cash flow hedge Net deferred tax liability $1,138 $ 159
derivatives 717 522
Pension and other postretirement benefit plan
adjustments (755) (380)
Other, net (25) (22)
Accumulated other comprehensive income (loss) $(105) $(431)

The PNC Financial Services Group, Inc. Form 10-K 187

A reconciliation between the statutory and effective tax rates A reconciliation of the beginning and ending balance of the
follows: liability for unrecognized tax benefits is as follows:

Reconciliation of Statutory and Effective Tax Rates Changes in Liability for Unrecognized Tax Benefits
Year ended December 31 2011 2010 2009 In millions 2011 2010 2009
Statutory tax rate 35.0% 35.0% 35.0% Balance of gross unrecognized tax benefits
Increases (decreases) resulting from at January 1 $238 $227 $257
State taxes net of federal benefit .4 .8 1.2 Increases:
Tax-exempt interest (1.7) (1.3) (1.2) Positions taken during a prior period 65 76 22
Life insurance (2.0) (1.8) (1.9) Positions taken during the current period 1 26
Dividend received deduction (1.6) (1.4) (1.2) Decreases:
Tax credits (5.1) (4.3) (5.4) Positions taken during a prior period (62) (49) (39)
IRS letter ruling and settlements (2.5) Settlements with taxing authorities (10) (13) (34)
Other (.5) 1.0 .4 Reductions resulting from lapse of statute
of limitations (23) (3) (5)
Effective tax rate 24.5% 25.5% 26.9%
Balance of gross unrecognized tax benefits
at December 31 $209 $238 $227
The net operating loss carryforwards at December 31, 2011
and 2010 follow:
It is reasonably possible that the liability for unrecognized tax
Net Operating Loss Carryforwards and Tax Credit benefits could increase or decrease in the next twelve months
Carryforwards due to completion of tax authorities exams or the expiration
of statutes of limitations. Management estimates that the
December 31 December 31 liability for unrecognized tax benefits could decrease by $81
In millions 2011 2010
million within the next twelve months.
Net Operating Loss Carryforwards:
Federal $ 30 $54 Examinations are complete for PNCs consolidated federal
State 1,460 1,600 income tax returns through 2006 having no outstanding
Valuation allowance State 14 21 unresolved issues. The Internal Revenue Service (IRS) is
Tax Credit Carryforwards: currently examining PNCs 2007 and 2008 returns. National
Citys consolidated federal income tax returns through 2007
Federal $ 112
have been audited by the IRS. Certain adjustments remain
State 3 under review by the IRS Appeals division for years 2003
through 2007. The IRS is currently examining National Citys
The federal net operating loss carryforwards expire from 2027 2008 return.
to 2028. The state net operating loss carryforwards will expire
from 2012 to 2031. The majority of the tax credit PNC files tax returns in most states and some non-U.S.
carryforwards expire in 2031. jurisdictions each year and is under continuous examination
by various state taxing authorities.
At December 31, 2011 and 2010, there were no undistributed
earnings of non-US subsidiaries for which deferred US With few exceptions, we are no longer subject to state and
income taxes had not been provided. local and non-U.S. income tax examinations by taxing
authorities for periods before 2003. For all open audits, any
Retained earnings at both December 31, 2011 and 2010 potential adjustments have been considered in establishing our
included $117 million in allocations for bad debt deductions reserve for uncertain tax positions as of December 31, 2011.
of former thrift subsidiaries for which no income tax has been
provided. Under current law, if certain subsidiaries use these Our policy is to classify interest and penalties associated with
bad debt reserves for purposes other than to absorb bad debt income taxes as income tax expense. For 2011, we had a
losses, they will be subject to Federal income tax at the benefit of $33 million of gross interest and penalties
current corporate tax rate. decreasing income tax expense. The total accrued interest and
penalties at December 31, 2011 and December 31, 2010 was
We had unrecognized tax benefits of $209 million at $81 million and $113 million, respectively.
December 31, 2011 and $238 million at December 31, 2010.
At December 31, 2011, $100 million of unrecognized tax
benefits, if recognized, would favorably impact the effective
income tax rate.

188 The PNC Financial Services Group, Inc. Form 10-K

NOTE 21 REGULATORY MATTERS Under federal law, a bank subsidiary generally may not extend
We are subject to the regulations of certain federal, state, and credit to the parent company or its non-bank subsidiaries on
foreign agencies and undergo periodic examinations by such terms and under circumstances that are not substantially the
regulatory authorities. same as comparable extensions of credit to nonaffiliates. No
extension of credit may be made to the parent company or a
The ability to undertake new business initiatives (including non-bank subsidiary which is in excess of 10% of the capital
acquisitions), the access to and cost of funding for new stock and surplus of such bank subsidiary or in excess of 20%
business initiatives, the ability to pay dividends or repurchase of the capital and surplus of such bank subsidiary as to
shares, the level of deposit insurance costs, and the level and aggregate extensions of credit to the parent company and its
nature of regulatory oversight depend, in large part, on a non-bank subsidiaries. Such extensions of credit, with limited
financial institutions capital strength. The minimum US exceptions, must be fully collateralized by certain specified
regulatory capital ratios under Basel I are 4% for Tier 1 risk- assets. In certain circumstances, federal regulatory authorities
based, 8% for total risk-based and 4% for leverage. To qualify may impose more restrictive limitations.
as well capitalized, regulators require banks to maintain
capital ratios of at least 6% for Tier 1 risk-based, 10% for total Federal Reserve Board regulations require depository
risk-based and 5% for leverage. To be well capitalized, a institutions to maintain cash reserves with a Federal Reserve
bank holding company must maintain capital ratios of at least Bank (FRB). At December 31, 2011, the balance outstanding
6% Tier 1 risk-based and 10% for total risk-based. At at the FRB was $407 million.
December 31, 2011 and December 31, 2010, PNC and PNC
Bank, N.A. met the well capitalized capital ratio
requirements based on US regulatory capital ratio NOTE 22 LEGAL PROCEEDINGS
requirements under Basel I. We establish accruals for legal proceedings, including
litigation and regulatory and governmental investigations and
The following table sets forth regulatory capital ratios for inquiries, when information related to the loss contingencies
PNC and its bank subsidiary, PNC Bank, N.A. represented by those matters indicates both that a loss is
probable and that the amount of loss can be reasonably
Regulatory Capital estimated. Any such accruals are adjusted thereafter as
appropriate to reflect changed circumstances. When we are
Amount Ratios
December 31 Dollars in millions 2011 2010 2011 2010
able to do so, we also determine estimates of possible losses
or ranges of possible losses, whether in excess of any related
Risk-based capital
accrued liability or where there is no accrued liability, for
Tier 1 disclosed legal proceedings (Disclosed Matters, which are
PNC $29,073 $26,092 12.6% 12.1% those matters disclosed in this Note 22). For Disclosed
PNC Bank, N.A. 25,536 24,722 11.4 11.8 Matters where we are able to estimate such possible losses or
Total ranges of possible losses, as of December 31, 2011, we
PNC 36,548 33,724 15.8 15.6
estimate that it is reasonably possible that we could incur
losses in an aggregate amount of up to approximately $550
PNC Bank, N.A. 32,322 31,662 14.4 15.1
million. The estimates included in this amount are based on
Leverage our analysis of currently available information and are subject
PNC 29,073 26,092 11.1 10.2 to significant judgment and a variety of assumptions and
PNC Bank, N.A. 25,536 24,722 10.0 10.0 uncertainties. As new information is obtained we may change
our estimates. Due to the inherent subjectivity of the
The principal source of parent company cash flow is the assessments and unpredictability of outcomes of legal
dividends it receives from its subsidiary bank, which may be proceedings, any amounts accrued or included in this
impacted by the following: aggregate amount may not represent the ultimate loss to us
from the legal proceedings in question. Thus, our exposure
Capital needs, and ultimate losses may be higher, and possibly significantly
Laws and regulations, so, than the amounts accrued or this aggregate amount.
Corporate policies,
Contractual restrictions, and The aggregate estimated amount provided above does not
Other factors. include an estimate for every Disclosed Matter, as we are
unable, at this time, to estimate the losses that it is reasonably
Also, there are statutory and regulatory limitations on the
possible that we could incur or ranges of such losses with
ability of national banks to pay dividends or make other
respect to some of the matters disclosed for one or more of the
capital distributions. The amount available for dividend
following reasons. In our experience, legal proceedings are
payments to the parent company by PNC Bank, N.A. without
inherently unpredictable. In many legal proceedings, various
prior regulatory approval was approximately $1.7 billion at
factors exacerbate this inherent unpredictability, including,
December 31, 2011.

The PNC Financial Services Group, Inc. Form 10-K 189

among others, one or more of the following: the proceeding is
in its early stages; the damages sought are unspecified,
unsupported or uncertain; it is unclear whether a case brought
as a class action will be allowed to proceed on that basis or, if
permitted to proceed as a class action, how the class will be
defined; the plaintiff is seeking relief other than or in addition
to compensatory damages; the matter presents meaningful
legal uncertainties, including novel issues of law; we have not
engaged in meaningful settlement discussions; discovery has
not started or is not complete; there are significant facts in
dispute; and there are a large number of parties named as
defendants (including where it is uncertain how liability, if
any, will be shared among multiple defendants). Generally,
the less progress that has been made in the proceedings or the
broader the range of potential results, the harder it is for us to
estimate losses or ranges of losses that it is reasonably
possible we could incur. Therefore, as the estimated aggregate
amount disclosed above does not include all of the Disclosed
Matters, the amount disclosed above does not represent our
maximum reasonably possible loss exposure for all of the
Disclosed Matters. The estimated aggregate amount also does
not reflect any of our exposure to matters not so disclosed, as
discussed below under Other.
We include in some of the descriptions of individual
Disclosed Matters certain quantitative information related to
the plaintiffs claim against us alleged in the plaintiffs
pleadings or otherwise publicly available. While information
of this type may provide insight into the potential magnitude
of a matter, it does not necessarily represent our estimate of
reasonably possible loss or our judgment as to any currently
appropriate accrual.
Some of our exposure in Disclosed Matters may be offset by
applicable insurance coverage. We do not consider the
possible availability of insurance coverage in determining the
amounts of any accruals (although we record the amount of
related insurance recoveries that are deemed probable up to
the amount of the accrual) or in determining any estimates of
possible losses or ranges of possible losses.
Securities and State Law Fiduciary Cases against National
City
In January 2008, a lawsuit (In re National City
Corporation Securities, Derivative & ERISA
Litigation (The Securities Case) (MDL No. 2003,
Case No: 1:08-nc-70004-SO)) was filed in the United
States District Court for the Northern District of Ohio
against National City and certain officers and
directors of National City. As amended, this lawsuit
was brought as a class action on behalf of purchasers
of National Citys stock during the period April 30,
2007 to April 21, 2008 and also on behalf of
everyone who acquired National City stock pursuant
to a registration statement filed in connection with its
acquisition of MAF Bancorp in 2007. The amended
complaint alleges violations of federal securities laws
190 The PNC Financial Services Group, Inc. Form 10-K
regarding public statements and disclosures relating
to, among other things, the nature, quality,
performance, and risks of National Citys non-prime,
residential construction, and National Home Equity
portfolios, its loan loss reserves, its financial
condition, and related allegedly false and misleading
financial statements. In the amended complaint, the
plaintiffs seek, among other things, unspecified
damages and attorneys fees. A motion to dismiss the
amended complaint is pending. A magistrate judge
has recommended dismissal of the lawsuit without
prejudice, with a right for the plaintiffs to file a
further amended complaint within 30 days. The
magistrates recommendation is subject to adoption
by the district court. The plaintiffs have filed
objections to that recommendation. In August 2011,
the parties entered into a memorandum of
understanding providing for the settlement of the
lawsuit for $168 million and in November filed
formal settlement papers with the district court. The
settlement is conditioned on, among other things,
final court approval. The court has scheduled a
hearing in March 2012 to determine if it will grant
final approval to the settlement. As a result of
existing accruals and recorded probable insurance
recoveries, PNC expects the impact of this settlement
on our future results of operations to be immaterial.
In May 2008, a lawsuit (The Dispatch Printing
Company, et al. v. National City Corporation, et al.
(Case No. 08CVH-6506)) was filed on behalf of an
individual plaintiff in the Franklin County, Ohio,
Court of Common Pleas against National City,
certain directors of National City, and Corsair
Co-Invest, L.P. and unnamed other investors
participating in the April 2008 capital infusion into
National City, alleging that National Citys directors
breached their fiduciary duties by entering into this
capital infusion transaction. A motion to dismiss the
case as originally filed was denied. After the initial
filing, two additional plaintiffs were added. The
plaintiffs filed an amended complaint in December
2010. The amended complaint adds PNC as a
defendant as successor in interest to National City. In
the amended complaint, which included some
additional allegations, the plaintiffs seek, among
other things, unspecified actual and punitive
damages, and attorneys fees. In December 2011, we
filed a motion for summary judgment. The court has
not yet ruled on this motion. The court has currently
scheduled the trial to begin in July 2012.
Interchange Litigation
Beginning in June 2005, a series of antitrust lawsuits were
filed against Visa, MasterCard, and several major financial
institutions, including cases naming National City (since
merged into PNC) and its subsidiary, National City Bank of
Kentucky (since merged into National City Bank which in
turn was merged into PNC Bank, N.A.). The cases have been
consolidated for pretrial proceedings in the United States
District Court for the Eastern District of New York under the
caption In re Payment Card Interchange Fee and Merchant-
Discount Antitrust Litigation (Master File
No. 1:05-md-1720-JG-JO). Those cases naming National City
were brought as class actions on behalf of all persons or
business entities who have accepted Visa or MasterCard.
The plaintiffs, merchants operating commercial businesses
throughout the US and trade associations, allege, among other
things, that the defendants conspired to fix the prices for
general purpose card network services and otherwise imposed
unreasonable restraints on trade, resulting in the payment of
inflated interchange fees, in violation of the antitrust laws. In
January 2009, the plaintiffs filed amended and supplemental
complaints adding, among other things, allegations that the
restructuring of Visa and MasterCard, each of which included
an initial public offering, violated the antitrust laws. In their
complaints, the plaintiffs seek, among other things, injunctive
relief, unspecified damages (trebled under the antitrust laws)
and attorneys fees. In January 2008, the district court
dismissed the plaintiffs claims for damages incurred prior to
January 1, 2004. In April 2009, the defendants filed a motion
to dismiss the amended and supplemental complaints. In May
2009, class plaintiffs filed a motion for class certification.
Both of these motions were argued in November 2009. In
February 2011, the defendants filed a motion for summary
judgment, which was argued in November 2011. The court
has not yet ruled on any of these motions.
National City and National City Bank entered into judgment
and loss sharing agreements with Visa and certain other banks
with respect to all of the above referenced litigation. All of the
litigation against Visa is also subject to the indemnification
obligations described in Note 23 Commitments and
Guarantees. PNC Bank, N.A. is not named a defendant in any
of the Visa or MasterCard related antitrust litigation nor was it
initially a party to the judgment or loss sharing agreements,
but it has been subject to these indemnification obligations
and became responsible for National City Banks position in
the litigation and responsibilities under the agreements upon
completion of the merger of National City Bank into PNC
Bank, N.A. In March 2011, we entered into a MasterCard
Settlement and Judgment Sharing Agreement with
MasterCard and other financial institution defendants and an
Omnibus Agreement Regarding Interchange Litigation
Sharing and Settlement Sharing with Visa, MasterCard and
other financial institution defendants. If there is a resolution of
all claims against all defendants, the Omnibus Agreement, in
substance, apportions that resolution into a Visa portion and a
MasterCard portion, with the Visa portion being two-thirds
and the MasterCard portion being one-third. This
apportionment only applies in the case of either a global
settlement involving all defendants or an adverse judgment
against the defendants, to the extent that damages either are
related to the merchants inter-network conspiracy claims or
are otherwise not attributed to specific MasterCard or Visa
conduct or damages. The MasterCard portion (or any
MasterCard-related liability not subject to the Omnibus
Agreement) will then be apportioned under the MasterCard
Settlement and Judgment Sharing Agreement among
MasterCard and PNC and the other financial institution
defendants that are parties to this agreement. The
responsibility for the Visa portion (or any Visa-related
liability not subject to the Omnibus Agreement) will be
apportioned under the pre-existing indemnification
responsibilities and judgment and loss sharing agreements.
CBNV Mortgage Litigation
Between 2001 and 2003, on behalf of either individual
plaintiffs or proposed classes of plaintiffs, several separate
lawsuits were filed in state and federal courts against
Community Bank of Northern Virginia (CBNV) and other
defendants asserting claims arising from second mortgage
loans made to the plaintiffs. CBNV was merged into one of
Mercantile Bankshares Corporations banks before PNC
acquired Mercantile in 2007. The state lawsuits were removed
to federal court and, with the lawsuits that had been filed in
federal court, were consolidated for pre-trial proceedings in a
multidistrict litigation (MDL) proceeding in the United States
District Court for the Western District of Pennsylvania,
currently under the caption In re: Community Bank of
Northern Virginia Lending Practices Litigation (No. 03-0425
(W.D. Pa.), MDL No. 1674). In January 2008, the
Pennsylvania district court issued an order sending back to the
General Court of Justice, Superior Court Division, for Wake
County, North Carolina the claims of two proposed class
members. These claims are asserted in a case originally filed
in 2001 and captioned Bumpers, et al. v. Community Bank of
Northern Virginia (01-CVS-011342).
MDL Proceedings in Pennsylvania. In August 2006, a proposed
settlement agreement covering some of the class members was
submitted to the district court handling the MDL proceedings
for its approval, which it granted in August 2008. The class
covered by this settlement is referred to as the Kessler class.
Some objecting members of the Kessler class appealed the
final approval order to the United States Court of Appeals for
the Third Circuit. In their appeal, the objecting Kessler class
members had asserted that CBNVs annual percentage rate
disclosures violated the Truth in Lending Act (TILA) and the
Home Ownership and Equity Protection Act (HOEPA), that
those claims are very valuable, and that the settling plaintiffs
should have asserted those claims. The settling plaintiffs
advanced a number of reasons why they had not asserted
TILA/HOEPA claims. In September 2010, the court of
appeals vacated the district courts class certification decision
and approval of the class settlement and remanded the case to
the district court for further proceedings. As a result of the
settling plaintiffs decision not to continue to pursue the
settlement and instead participate in the joint amended
consolidated class action complaint described below,
however, there will be no proceedings in the district court on
the remand relating to the settlement.
The PNC Financial Services Group, Inc. Form 10-K 191
In October 2011, the plaintiffs filed a joint consolidated
amended class action complaint covering all of the class
action lawsuits pending in this proceeding. The amended
complaint names CBNV, another bank, and purchasers of
loans originated by CBNV and the other bank (including the
Residential Funding Company, LLC) as defendants. The
principal allegations in the amended complaint are that a
group of persons and entities collectively characterized as the
Shumway/Bapst Organization referred prospective second
residential mortgage loan borrowers to CBNV and the other
bank, that CBNV and the other bank charged these borrowers
improper title and loan fees at loan closings, that the
disclosures provided to the borrowers at loan closings were
inaccurate, and that CBNV and the other bank paid some of
the loan fees to the Shumway/Bapst Organization as purported
kickbacks for the referrals. The amended complaint asserts
claims for violations of the Real Estate Settlement Procedures
Act (RESPA), TILA, as amended by HOEPA, and the
Racketeer Influenced and Corrupt Organizations Act (RICO).
The amended complaint seeks to certify a class of all
borrowers who obtained a second residential non-purchase
money mortgage loan, secured by their principal dwelling,
from either CBNV or the other defendant bank, the terms of
which made the loan subject to HOEPA. The plaintiffs allege
that there are approximately 50,000 members of this class.
They seek, among other things, unspecified damages
(including treble damages under RICO and RESPA),
rescission of loans, declaratory and injunctive relief, interest,
and attorneys fees. In November 2011 the defendants filed a
motion to dismiss the amended complaint. The court has not
yet ruled on this motion.
North Carolina Proceedings. The plaintiffs in Bumpers make
similar allegations to those included in the amended complaint
in the MDL proceedings. Following the remand to North
Carolina state court, the plaintiffs in Bumpers sought to
represent a class of North Carolina borrowers in state court
proceedings in North Carolina. The plaintiffs claim that this
class consists of approximately 650 borrowers. The district
court in Pennsylvania handling the MDL proceedings enjoined
class proceedings in Bumpers in March 2008. In April 2008, the
North Carolina superior court granted the Bumpers plaintiffs
motion for summary judgment on their individual claims and
awarded them approximately $11,000 each plus interest. CBNV
appealed the grant of the motion for summary judgment. In
September 2011, the North Carolina Court of Appeals affirmed
in part and reversed in part the granting of the plaintiffs motion
for summary judgment. The court affirmed the plaintiffs
judgment on their claim that they paid a loan discount fee but
were not provided a loan discount. It reversed the plaintiffs
judgment on their claim that they were overcharged for
settlement services and remanded that claim for trial. The court
also held that, on remand, the trial court may consider the issue
of class certification. Thereafter, we petitioned the North
Carolina Supreme Court for discretionary review of the decision
of the North Carolina Court of Appeals and for a stay of
192 The PNC Financial Services Group, Inc. Form 10-K
proceedings pending the decision on this petition and, if
granted, the decision on the appeal. The North Carolina
Supreme Court thereafter granted a temporary stay and, in
October 2011, denied the plaintiffs motion to dissolve the stay.
Overdraft Litigation
Beginning in October 2009, PNC Bank and National City
Bank have been named in six lawsuits brought as class actions
relating to the manner in which they charged overdraft fees on
ATM and debit transactions to customers. Three lawsuits
naming PNC Bank and one naming National City Bank, along
with similar lawsuits against numerous other banks, have been
consolidated for pre-trial proceedings in the United States
District Court for the Southern District of Florida (the MDL
Court) under the caption In re Checking Account Overdraft
Litigation (MDL No. 2036, Case No. 1:09-MD-02036-JLK ).
The first of these cases (Casayuran, et al. v. PNC Bank,
National Association (Case No. 10-cv-20496-JLK)) was
originally filed against PNC Bank in October 2009 in the
United States District Court for the District of New Jersey,
and an amended complaint was filed in June 2010 in the MDL
Court. The other cases that have been consolidated were filed
in June 2010 in the United States District Court for the
Southern District of Florida (Cowen, et al. v. PNC Bank,
National Association (Case No. 10-CV-21869-JLK),
Hernandez, et al. v. PNC Bank, National Association (Case
No. 10-CV-21868-JLK), and Matos v. National City Bank
(Case No. 10-cv-21771-JLK). A consolidated amended
complaint was filed in December 2010 that consolidated all of
the claims in these four MDL Court cases. It seeks to certify
multi-state classes of customers for the common law claims
described below (covering all states in which PNC and
National City had retail branch operations during the class
period), and subclasses of PNC Bank customers with accounts
in Pennsylvania and New Jersey branches and of National
City Bank customers with accounts in Illinois branches, with
each subclass being asserted for purposes of claims under
those states consumer protection statutes. No class periods
are stated in any of the complaints, other than for the
applicable statutes of limitations, which vary by state and
claim. Our motion to dismiss the consolidated amended
complaint was denied in March 2011.
In December 2011, the plaintiffs in the MDL Court moved for
class certification. In light of the Trombley settlement
described below, the National City plaintiffs did not move for
class certification on behalf of National City customers. As to
PNC, the plaintiffs moved for class certification in accordance
with their consolidated amended complaint, except that they
are not seeking a class as to the conversion claims. The court
has not yet ruled on this motion. The MDL Court has
scheduled trial for January 2013 for the cases that will be tried
in that court.
In December 2010, an additional lawsuit (Henry v. PNC Bank,
National Association (No. GD-10-022974)) was filed in the
Court of Common Pleas of Allegheny County, Pennsylvania
on behalf of all current citizens of Pennsylvania who are
domiciled in Pennsylvania who had or have a PNC checking
or debit account used primarily for personal, family or
household purposes and who incurred overdraft and related
fees on transactions resulting from the methodology of posting
transactions from December 8, 2004 through August 14, 2010.
We filed preliminary objections seeking dismissal of each of
the claims in this lawsuit in March 2011. In January 2012, the
court ruled on our preliminary objections, dismissing several
claims but overruling our objections with respect to claims for
breach of contract and the duty of good faith and fair dealing
and for violation of Pennsylvanias consumer protection
statute.
The sixth lawsuit (Trombley, et al. v. National City Bank
(Civil Action No. 10-00232 (JDB)) was brought as a class
action against National City Bank in the United States District
Court for the District of Columbia. In July 2010, the parties
reached a tentative settlement of this lawsuit. The settlement
class included all National City customers who incurred
during the period July 1, 2004 to August 15, 2010 overdraft
fees that had not been reversed or refunded. Several members
of the proposed settlement class, including the named plaintiff
in another lawsuit filed in the MDL Court, filed objections to
approval of this settlement. Following a hearing in July 2011,
the court granted final approval in December 2011. In
granting final approval, the court shortened the ending date for
the class period to June 21, 2010. One of the objectors
appealed the courts order approving the settlement to the
United States Court of Appeals for the District of Columbia
Circuit. In February 2012, this objector moved to voluntarily
dismiss the appeal, and the court of appeals dismissed it,
thereby making the settlement final. The amount of the
settlement is not material to PNC and has been accrued.
The complaints in each of these lawsuits allege that the banks
engaged in unlawful practices in assessing overdraft fees
arising from electronic point-of-sale and ATM debits. The
principal practice challenged in these lawsuits is the banks
purportedly common policy of posting debit transactions on a
daily basis from highest amount to lowest amount, thereby
allegedly inflating the number of overdraft fees assessed.
Other practices challenged include the failure to decline to
honor debit card transactions where the account has
insufficient funds to cover the transactions.
In the consolidated amended complaint in the MDL Court, the
plaintiffs assert claims for breach of the covenant of good
faith and fair dealing; unconscionability; conversion, unjust
enrichment; and violation of the consumer protection statutes
of Pennsylvania, Illinois and New Jersey. In the Henry case,
the remaining claims are for breach of contract and the duty of
good faith and fair dealing and for violation of Pennsylvanias
consumer protection statute. The action against National City
in the District of Columbia added claims under the Ohio and
Michigan consumer protection statutes and the federal
Electronic Funds Transfer Act. In their complaints, the
plaintiffs seek, among other things, restitution of overdraft
fees paid, unspecified actual and punitive damages (with
actual damages, in some cases, trebled under state law),
pre-judgment interest, attorneys fees, and declaratory relief
finding the overdraft policies to be unfair and unconscionable.
Fulton Financial
In 2009, Fulton Financial Advisors, N.A. filed lawsuits against
PNC Capital Markets, LLC and NatCity Investments, Inc. in
the Court of Common Pleas of Lancaster County,
Pennsylvania arising out of Fultons purchase of auction rate
certificates (ARCs) through PNC and NatCity. Each of the
lawsuits alleges violations of the Pennsylvania Securities Act,
negligent misrepresentation, negligence, breach of fiduciary
duty, common law fraud, and aiding and abetting common law
fraud in connection with the purchase of the ARCs by Fulton.
Specifically, Fulton alleges that, as a result of the decline of
financial markets in 2007 and 2008, the market for ARCs
became illiquid; that PNC and NatCity knew or should have
known of the increasing threat of the ARC market becoming
illiquid; and that PNC and NatCity did not inform Fulton of
this increasing threat, but allowed Fulton to continue to
purchase ARCs, to Fultons detriment. In its complaints,
Fulton alleges that it then held ARCs purchased through PNC
for a price of more than $123 million and purchased through
NatCity for a price of more than $175 million. In each
complaint, Fulton seeks, among other things, unspecified
actual and punitive damages, rescission, attorneys fees and
interest.
In the case against PNC (Fulton Financial Advisors, N.A. v.
PNC Capital Markets, LLC (CI 09-10838)), PNC filed
preliminary objections to Fultons complaint, which were
denied. NatCity removed the case against it to the United
States District Court for the Eastern District of Pennsylvania
(Fulton Financial Advisors, N.A. v. NatCity Investments, Inc.
(No. 5:09-cv-04855)), and in November 2009 filed a motion
to dismiss the complaint. The court has not yet ruled on this
motion.
FHLB
In October 2010, the Federal Home Loan Bank of Chicago
brought a lawsuit in the Circuit Court of Cook County,
Illinois, against numerous financial companies, including The
PNC Financial Services Group, Inc., as successor in interest to
National City Corporation, and PNC Investments LLC, as
successor in interest to NatCity Investments, Inc. (Federal
Home Loan Bank of Chicago v. Bank of America Funding
Corp., et al. (Case No. 10CH45033)). The complaint alleges
that the defendants have liability to the Federal Home Loan
Bank of Chicago in a variety of capacities (in the case of the
National City entities, as underwriters) under Illinois state
securities law and common law in connection with the alleged
purchase of private-label mortgage-backed securities by the
Federal Home Loan Bank. According to the complaint, the
Federal Home Loan Bank purchased approximately $3.3
The PNC Financial Services Group, Inc. Form 10-K 193
billion in mortgage-backed securities in total in transactions
addressed by the complaint, approximately $345 million of
which was allegedly in transactions involving the National
City entities. The complaint alleges misrepresentations and
omissions in connection with the sales of the mortgage-backed
securities in question. In its complaint, the Federal Home
Loan Bank seeks, among other things, rescission, unspecified
damages, interest, and attorneys fees. In November 2010, the
defendants removed the case to the United States District
Court for the Northern District of Illinois. In January 2011, the
district court remanded the case to the Circuit Court of Cook
County. The plaintiff amended its complaint in March 2011
and filed a corrected amended complaint in April 2011. The
corrected amended complaint does not identify any additional
transaction for which the plaintiff seeks recovery from PNC
nor does it add any additional substantive allegations. In May
2011, the defendants filed a motion to dismiss the corrected
amended complaint. The court has not yet ruled on this
motion.
Weavering Macro Fixed Income Fund
In July 2010, PNC completed the sale of PNC Global
Investment Servicing (PNC GIS) to The Bank of New York
Mellon Corporation (BNY-Mellon), pursuant to a stock
purchase agreement dated February 1, 2010. In July 2009, the
liquidators of the Weavering Macro Fixed Income Fund
Limited (Weavering) issued a Plenary Summons in the High
Court, Dublin, Ireland, in connection with a European
subsidiary of PNC GISs provision of administration services
to Weavering. The Plenary Summons was served on the PNC
GIS subsidiary (GIS Europe) on or about June 30, 2010. In
May 2011, the liquidator served a Notice of Intention to
Proceed and Statement of Claim, which alleges, among other
things, that GIS Europe breached its contractual duties to
Weavering as well as an alleged duty of care to Weavering,
and investors in Weavering, and makes claims of breach of the
administration and accounting services agreement, negligence,
gross negligence, breach of duty, misrepresentation and
negligent misstatement. The statement of claim further alleges
that investors in Weavering lost approximately 282,000,000
and also expended approximately 98,000,000 in brokerage
and exchange commissions, interest, and fees as a result of the
transactions at issue. The statement of claim seeks, among
other things, damages, costs, and interest. In January 2012,
upon application by GIS Europe, the court issued a judgment
ordering a hearing on certain preliminary issues (a modular
trial).
In May 2011, BNY-Mellon provided notice to PNC of an
indemnification claim pursuant to the stock purchase
agreement related to this litigation.
365/360 Litigation
PNC Bank and National City Bank have been named as
defendants in three lawsuits seeking to certify classes of
commercial borrowers bringing claims for breach of contract
194 The PNC Financial Services Group, Inc. Form 10-K
arising from the use of the 365/360 method of interest
computation in certain commercial promissory notes. The first
of these cases (DK&D Properties, LLC v. National City Bank
(Case no. 08 cv 680078)), was filed in December 2008 against
National City Bank in the Court of Common Pleas of
Cuyahoga County, Ohio. It seeks to certify a class consisting
of certain Ohio commercial borrowers of National City Bank
for these claims. In July 2009, the court denied National City
Banks motion to dismiss the complaint. In December 2011,
plaintiff filed a motion for class certification. The court has
not yet ruled on this motion. Also in December 2011, the court
granted National City Banks motion to stay the case pending
the decision of the Ohio Supreme Court in JNT Properties,
LLC v. KeyBank National Association (Case No. 11-1392),
which, although neither PNC Bank nor National City Bank are
parties, presents many of the same issues as those in DK&D
Properties.
The second case (Kreisler & Kreisler, LLC v. National City
Bank, et al. (Case no. 4:10-cv-00956)) was filed in the United
States District Court for the Eastern District of Missouri in
May 2010 against National City Bank and also purported to
name PNC Bank Corp. as a defendant. It sought to certify a
national class of commercial borrowers for these claims. In
March 2011, the district court granted the defendants motion
to dismiss the complaint. In October 2011, the United States
Court of Appeals for the Eighth Circuit affirmed the dismissal
by the district court. In the third case (PNC Bank, National
Association v. St. Louis PET Centers, LLC, et al. (Case no.
10SL-CC01076)), a borrower filed a counterclaim, brought as
a class action, against PNC Bank in the Circuit Court of
County of St. Louis, Missouri in November 2010. The claims
and proposed class set forth in this complaint are similar to
those in Kreisler & Kreisler. In March 2011, the court denied
our motion to dismiss the counterclaim.
Plaintiffs in these cases allege generally that they obtained
fixed or variable rate commercial loans from PNC Bank or
National City Bank pursuant to promissory notes or loan
agreements setting forth annual or per annum interest rates,
that the banks use of the 365/360 method of calculation of
interest caused the borrower to pay interest over a calendar
year at a higher rate than the per annum rate stated in the
promissory notes, and that this was a breach of the terms of
the promissory notes. Plaintiffs in each of these cases seek
declaratory and injunctive relief, compensatory damages,
prejudgment interest, and attorneys fees.
False Claims Act Lawsuit
PNC Bank has been named as a defendant, along with other
lenders, in a qui tam lawsuit brought in the U.S. District Court
for the Northern District of Georgia by two individuals on
behalf of the United States under the federal False Claims Act
(United States ex rel. Bibby & Donnelly v. Wells Fargo, et al.
(1:06-CV-0547-AT)). The lawsuit was originally filed under
seal, with a second amended complaint filed in June 2011. The
second amended complaint was unsealed by the district court
in October 2011. In the second amended complaint, the
plaintiffs, who allege that they are officers of a mortgage
broker, allege that several mortgage originators, including
entities affiliated with PNC Banks predecessor, National City
Bank, made false statements to the U.S. Department of
Veterans Affairs in order to obtain loan guarantees by the VA
under its Interest Rate Reduction Refinancing Loans (IRRRL)
program. Under that program, the VA guarantees refinancing
loans made to veterans if the loans meet program
requirements, one of which limits the type and amount of fees
that can be charged to borrowers by lenders. The plaintiffs
allege, among other things, that the defendants charged
impermissible fees to borrowers under the VA program and
then made false statements to the VA concerning such fees in
violation of the civil False Claims Act. The plaintiffs allege
that, by doing so, National City Bank and the other defendants
caused the VA to pay, among other costs, amounts in respect
of the loan guarantees to which the defendants were not
entitled. On their behalf and on behalf of the United States, the
plaintiffs seek, among other things, unspecified damages equal
to the loss the defendants allegedly caused the United States
(including treble damages under the False Claims Act),
statutory civil penalties between $5,500 and $11,000 per false
claim made by the defendants, injunctive relief against
submission of false claims to the United States and imposing
unallowable charges against veterans participating in the
IRRRL program, and attorneys fees. To date, the United
States has not joined in the prosecution of the plaintiffs
lawsuit. In December 2011, PNC moved to dismiss the action.
A number of the other defendants have also filed motions to
dismiss. The court has not yet ruled on these motions.
Captive Mortgage Reinsurance Litigation
In December 2011, a lawsuit (White, et al. v. The PNC
Financial Services Group, Inc., et al. (Civil Action
No. 11-7928)) was filed against PNC (as successor in interest
to National City Corporation and several of its subsidiaries)
and several mortgage insurance companies in the United
States District Court for the Eastern District of Pennsylvania.
This lawsuit, which was brought as a class action, alleges that
National City structured its program of reinsurance of private
mortgage insurance in such a way as to avoid a true transfer of
risk from the mortgage insurers to National Citys captive
reinsurer. The plaintiffs allege that the payments from the
mortgage insurers to the captive reinsurer constitute
kickbacks, referral payments, or unearned fee splits prohibited
under the Real Estate Settlement Procedures Act (RESPA), as
well as common law unjust enrichment. The plaintiffs claim,
among other things, that from the beginning of 2004 until the
end of 2010 National Citys captive reinsurer collected from
the mortgage insurance company defendants at least $219
million as its share of borrowers private mortgage insurance
premiums and that during the same period its share of paid
claims was approximately $12 million. The plaintiffs seek to
certify a nationwide class of all persons who obtained
residential mortgage loans originated, funded or originated
through correspondent lending by National City or any of its
subsidiaries or affiliates
between January 1, 2004 and the present and, in connection
with these mortgage loans, purchased private mortgage
insurance and whose residential mortgage loans were included
within National Citys captive mortgage reinsurance
arrangements. Plaintiffs seek, among other things, statutory
damages under RESPA (which include treble damages),
restitution of reinsurance premiums collected, disgorgement of
profits, and attorneys fees.
Residential Mortgage-Backed Securities Indemnification
Demands
We have received indemnification demands from several
entities sponsoring residential mortgage-backed securities and
their affiliates where purchasers of the securities have brought
litigation against the sponsors and other parties involved in the
securitization transactions. National City Mortgage had sold
whole loans to the sponsors or their affiliates that were
allegedly included in certain of these securitization
transactions. According to the indemnification demands, the
plaintiffs claims in these lawsuits are based on alleged
misstatements and omissions in the offering documents for
these transactions. The indemnification demands assert that
agreements governing the sale of these loans or the
securitization transactions to which National City Mortgage is
a party require us to indemnify the sponsors and their affiliates
for losses suffered in connection with these lawsuits. At
present, there has been no determination that the parties
seeking indemnification have any liability to the plaintiffs in
these lawsuits.
Other Regulatory and Governmental Inquiries
PNC is the subject of investigations, audits and other forms of
regulatory and governmental inquiry covering a broad range
of issues in our banking, securities and other financial services
businesses, in some cases as part of regulatory reviews of
specified activities at multiple industry participants. Over the
last few years, we have experienced an increase in regulatory
and governmental investigations, audits and other inquiries.
Areas of current regulatory or governmental inquiry with
respect to PNC include consumer financial protection, fair
lending, mortgage origination and servicing, mortgage-related
insurance and reinsurance, municipal finance activities, and
participation in government insurance or guarantee programs,
some of which are described below. These inquiries, including
those described below, may lead to administrative, civil or
criminal proceedings, and possibly result in remedies
including fines, penalties, restitution, alterations in our
business practices, and in additional expenses and collateral
costs.
One area of significant regulatory and governmental
focus has been mortgage lending and servicing.
Numerous federal and state governmental, legislative
and regulatory authorities are investigating practices
in this area. PNC has received inquiries from, or is
the subject of investigations by, a broad range of
governmental, legislative and regulatory authorities
relating to our activities in this area and is
cooperating with these investigations and inquiries.
The PNC Financial Services Group, Inc. Form 10-K 195
 As a result of the number and range of authorities
conducting the investigations and inquiries, as well as
the nature of these types of investigations and
inquiries, among other factors, PNC cannot at this
time predict the ultimate overall cost to or effect on
PNC from potential governmental, legislative or
regulatory actions arising out of these investigations
and inquiries.
In April 2011, as a result of a publicly-
disclosed interagency horizontal review of
residential mortgage servicing operations at
fourteen federally regulated mortgage
servicers, PNC entered into a consent order
with the Board of Governors of the Federal
Reserve System and PNC Bank entered into a
consent order with the Office of the
Comptroller of the Currency. Collectively,
these consent orders describe certain
foreclosure-related practices and controls that
the regulators found to be deficient and require
PNC and PNC Bank to, among other things,
develop and implement plans and programs to
enhance PNCs residential mortgage servicing
and foreclosure processes, retain an
independent consultant to review certain
residential mortgage foreclosure actions, take
certain remedial actions, and oversee
compliance with the orders and the new plans
and programs. The two orders do not foreclose
the potential for civil money penalties from
either of these regulators.
In connection with these orders, PNC has
established a Compliance Committee of the
Boards of PNC and PNC Bank to monitor and
coordinate PNCs and PNC Banks
implementation of the commitments under the
orders. PNC and PNC Bank are executing
Action Plans designed to meet the requirements
of the orders. Consistent with the orders, PNC
has also engaged an independent consultant to
conduct a review of certain residential
foreclosure actions, including those identified
through borrower complaints, and identify
whether any remedial actions for borrowers are
necessary. The consultants review is
underway. PNC expects to take any required
remedial actions coming out of this review,
although the full scope and nature of any such
remedial actions is not currently known.
On February 9, 2012, the Department of
Justice, other federal regulators and 49 state
attorneys general announced agreements with
the five largest mortgage servicers. Under these
agreements, which remain subject to, among
other things, definitive documentation and
196 The PNC Financial Services Group, Inc. Form 10-K
court approval, the mortgage servicers will
make cash payments to federal and state
governments, provide various forms of
financial relief to borrowers, and implement
new mortgage servicing standards. These
governmental authorities are continuing their
review of, and have engaged in discussions
with, other mortgage servicers, including PNC,
that were subject to the interagency horizontal
review, which could result in the imposition of
substantial payments and other forms of relief
(similar to that agreed to by the five largest
servicers) on some or all of these mortgage
servicers, including PNC. Whether and to what
extent any such relief may be imposed on PNC
and other smaller servicers is not yet known.
PNC has received subpoenas from the U.S.
Attorneys Office for the Southern District of
New York concerning National City Banks
lending practices in connection with loans
insured by the Federal Housing Administration
(FHA) as well as certain non-FHA-insured loan
origination, sale and securitization practices.
The U.S. Attorneys Office inquiry is in its
early stage and PNC is cooperating with the
investigation.
The SEC previously commenced investigations of
activities of National City prior to its acquisition by
PNC. The SEC has requested, and we have provided
to the SEC, documents concerning, among other
things, National Citys capital-raising activities, loan
underwriting experience, allowance for loan losses,
marketing practices, dividends, bank regulatory
matters and the sale of First Franklin Financial
Corporation.
The SEC has been conducting an investigation into
events at Equipment Finance LLC (EFI), a subsidiary
of Sterling Financial Corporation, which PNC
acquired in April 2008. The United States Attorneys
Office for the Eastern District of Pennsylvania has
also been investigating the EFI situation.
Our practice is to cooperate fully with regulatory and
governmental investigations, audits and other inquiries,
including those described in this Note 22.
Other
In addition to the proceedings or other matters described
above, PNC and persons to whom we may have
indemnification obligations, in the normal course of business,
are subject to various other pending and threatened legal
proceedings in which claims for monetary damages and other
relief are asserted. We do not anticipate, at the present time,
that the ultimate aggregate liability, if any, arising out of such
other legal proceedings will have a material adverse effect on
our financial position. However, we cannot now determine
whether or not any claims asserted against us or others to whom
we may have indemnification obligations, whether in the
proceedings or other matters described above or otherwise, will
have a material adverse effect on our results of operations in
any future reporting period, which will depend on, among other
things, the amount of the loss resulting from the claim and the
amount of income otherwise reported for the reporting period.
See Note 23 Commitments and Guarantees for additional
information regarding the Visa indemnification and our other
obligations to provide indemnification, including to current
and former officers, directors, employees and agents of PNC
and companies we have acquired, including National City.
NOTE 23 COMMITMENTS AND GUARANTEES
EQUITY FUNDING AND OTHER COMMITMENTS
Our unfunded commitments at December 31, 2011 included
private equity investments of $247 million, and other
investments of $3 million.
STANDBY LETTERS OF CREDIT
We issue standby letters of credit and have risk participations
in standby letters of credit and bankers acceptances issued by
other financial institutions, in each case to support obligations
of our customers to third parties, such as remarketing
programs for customers variable rate demand notes. Net
outstanding standby letters of credit and internal credit ratings
were as follows:
Net Outstanding Standby Letters of Credit
December 31
Dollars in billions 2011
Net outstanding standby letters of credit $10.8
Internal credit ratings (as a percentage
of portfolio):
Pass (a) 94%
Below pass (b) 6%
(a) Indicates that expected risk of loss is currently low.
(b) Indicates a higher degree of risk of default.
If the customer fails to meet its financial or performance
obligation to the third party under the terms of the contract or
there is a need to support a remarketing program, then upon
the request of the guaranteed party, we would be obligated to
make payment to them. The standby letters of credit and risk
participations in standby letters of credit and bankers
acceptances outstanding on December 31, 2011 had terms
ranging from less than 1 year to 7 years. The aggregate
maximum amount of future payments PNC could be required
to make under outstanding standby letters of credit and risk
participations in standby letters of credit and bankers
acceptances was $14.4 billion at December 31, 2011, of which
$7.4 billion support remarketing programs.
As of December 31, 2011, assets of $2.0 billion secured
certain specifically identified standby letters of credit.
Recourse provisions from third parties of $3.6 billion were
also available for this purpose as of December 31, 2011. In
addition, a portion of the remaining standby letters of credit
and letter of credit risk participations issued on behalf of
specific customers is also secured by collateral or guarantees
that secure the customers other obligations to us. The
carrying amount of the liability for our obligations related to
standby letters of credit and risk participations in standby
letters of credit and bankers acceptances was $247 million at
December 31, 2011.
STANDBY BOND PURCHASE AGREEMENTS AND OTHER
LIQUIDITY FACILITIES
We enter into standby bond purchase agreements to support
municipal bond obligations. At December 31, 2011, the
aggregate of our commitments under these facilities was $543
million. We also enter into certain other liquidity facilities to
support individual pools of receivables acquired by
commercial paper conduits. At December 31, 2011, our total
commitments under these facilities were $199 million.
INDEMNIFICATIONS
We are a party to numerous acquisition or divestiture
agreements under which we have purchased or sold, or agreed
to purchase or sell, various types of assets. These agreements
can cover the purchase or sale of:
Entire businesses,
Loan portfolios,
Branch banks,
Partial interests in companies, or
Other types of assets.
December 31 These agreements generally include indemnification
2010
provisions under which we indemnify the third parties to these
$10.1 agreements against a variety of risks to the indemnified parties
as a result of the transaction in question. When PNC is the
seller, the indemnification provisions will generally also
90% provide the buyer with protection relating to the quality of the
10% assets we are selling and the extent of any liabilities being
assumed by the buyer. Due to the nature of these
indemnification provisions, we cannot quantify the total
potential exposure to us resulting from them.
We provide indemnification in connection with securities
offering transactions in which we are involved. When we are
the issuer of the securities, we provide indemnification to the
underwriters or placement agents analogous to the
indemnification provided to the purchasers of businesses from
us, as described above. When we are an underwriter or
placement agent, we provide a limited indemnification to the
issuer related to our actions in connection with the offering
and, if there are other underwriters, indemnification to the
other underwriters intended to result in an appropriate sharing
of the risk of participating in the offering. Due to the nature of
these indemnification provisions, we cannot quantify the total
potential exposure to us resulting from them.
In the ordinary course of business, we enter into certain types
of agreements that include provisions for indemnifying third
The PNC Financial Services Group, Inc. Form 10-K 197
parties. We also enter into certain types of agreements,
including leases, assignments of leases, and subleases, in
which we agree to indemnify third parties for acts by our
agents, assignees and/or sublessees, and employees. We also
enter into contracts for the delivery of technology service in
which we indemnify the other party against claims of patent
and copyright infringement by third parties. Due to the nature
of these indemnification provisions, we cannot calculate our
aggregate potential exposure under them.
We engage in certain insurance activities that require our
employees to be bonded. We satisfy this bonding requirement
by issuing letters of credit, which were insignificant in amount
at December 31, 2011.
In the ordinary course of business, we enter into contracts with
third parties under which the third parties provide services on
behalf of PNC. In many of these contracts, we agree to
indemnify the third party service provider under certain
circumstances. The terms of the indemnity vary from contract
to contract and the amount of the indemnification liability, if
any, cannot be determined.
We are a general or limited partner in certain asset
management and investment limited partnerships, many of
which contain indemnification provisions that would require
us to make payments in excess of our remaining unfunded
commitments. While in certain of these partnerships the
maximum liability to us is limited to the sum of our unfunded
commitments and partnership distributions received by us, in
the others the indemnification liability is unlimited. As a
result, we cannot determine our aggregate potential exposure
for these indemnifications.
In some cases, indemnification obligations of the types
described above arise under arrangements entered into by
predecessor companies for which we become responsible as a
result of the acquisition.
Pursuant to their bylaws, PNC and its subsidiaries provide
indemnification to directors, officers and, in some cases,
employees and agents against certain liabilities incurred as a
result of their service on behalf of or at the request of PNC
and its subsidiaries. PNC and its subsidiaries also advance on
behalf of covered individuals costs incurred in connection
with certain claims or proceedings, subject to written
undertakings by each such individual to repay all amounts
advanced if it is ultimately determined that the individual is
not entitled to indemnification. We generally are responsible
for similar indemnifications and advancement obligations that
companies we acquire had to their officers, directors and
sometimes employees and agents at the time of acquisition.
We advanced such costs on behalf of several such individuals
with respect to pending litigation or investigations during
2011. It is not possible for us to determine the aggregate
potential exposure resulting from the obligation to provide this
indemnity or to advance such costs.
198 The PNC Financial Services Group, Inc. Form 10-K
In connection with the sale of GIS, and in addition to
indemnification provisions as part of the divestiture
agreements, PNC agreed to continue to act for the benefit of
GIS as securities lending agent for certain of GISs clients. In
such role, we provided indemnification to those clients against
the failure of the borrowers to return the securities. The
market value of the securities lent was fully secured on a daily
basis; therefore, the exposure to us was limited to temporary
shortfalls in the collateral as a result of short-term fluctuations
in trading prices of the loaned securities. In addition, the
purchaser of GIS, BNY-Mellon, has entered into an agreement
to indemnify PNC with respect to such exposure on the terms
set forth in such indemnification agreement. Effective July 18,
2011, PNC Bank, National Association assigned its securities
lending agent responsibilities to BNY-Mellon and no longer
acts as securities lending agent for any of GISs clients. Also
in connection with the GIS divestiture, PNC has agreed to
indemnify the buyer generally as described above.
VISA INDEMNIFICATION
Our payment services business issues and acquires credit and
debit card transactions through Visa U.S.A. Inc. card
association or its affiliates (Visa).
In October 2007, Visa completed a restructuring and issued
shares of Visa Inc. common stock to its financial institution
members (Visa Reorganization) in contemplation of its initial
public offering (IPO). As part of the Visa Reorganization, we
received our proportionate share of a class of Visa Inc.
common stock allocated to the US members. Prior to the IPO,
the US members, which included PNC, were obligated to
indemnify Visa for judgments and settlements related to the
specified litigation.
As a result of the acquisition of National City, we became
party to judgment and loss sharing agreements with Visa and
certain other banks. The judgment and loss sharing
agreements were designed to apportion financial
responsibilities arising from any potential adverse judgment or
negotiated settlements related to the specified litigation.
In March 2011, Visa funded $400 million to their litigation
escrow account and reduced the conversion ratio of Visa B to
A shares. We consequently recognized our estimated $38
million share of the $400 million as a reduction of our
previously established indemnification liability and a
reduction of noninterest expense.
In December 2011, Visa funded $1.6 billion to their litigation
escrow account. We consequently recognized $32 million as a
reduction of our previously established indemnification
liability and a reduction of noninterest expense. As of
December 31, 2011, our recognized Visa indemnification
liability was zero. As we continue to have an obligation to
indemnify Visa for judgments and settlements for the
remaining specified litigation, we may have additional
exposure in the future to the specified Visa litigation.
RECOURSE AND REPURCHASE OBLIGATIONS
As discussed in Note 3 Loans Sale and Servicing Activities
and Variable Interest Entities, PNC has sold commercial
mortgage and residential mortgage loans directly or indirectly
in securitizations and whole-loan sale transactions with
continuing involvement. One form of continuing involvement
includes certain recourse and loan repurchase obligations
associated with the transferred assets in these transactions.
COMMERCIAL MORTGAGE LOAN RECOURSE OBLIGATIONS
We originate, close and service certain multi-family
commercial mortgage loans which are sold to FNMA under
FNMAs DUS program. We participated in a similar program
with the FHLMC.
Under these programs, we generally assume up to a one-third
pari passu risk of loss on unpaid principal balances through a
loss share arrangement. At December 31, 2011 and
December 31, 2010, the unpaid principal balance outstanding
of loans sold as a participant in these programs was $13.0
billion and $13.2 billion, respectively. The potential maximum
exposure under the loss share arrangements was $4.0 billion at
both December 31, 2011 and December 31, 2010. We
maintain a reserve for estimated losses based upon our
exposure. The reserve for losses under these programs totaled
$47 million and $54 million as of December 31, 2011 and
December 31, 2010, respectively, and is included in Other
liabilities on our Consolidated Balance Sheet. If payment is
required under these programs, we would not have a
contractual interest in the collateral underlying the mortgage
loans on which losses occurred, although the value of the
collateral is taken into account in determining our share of
such losses. Our exposure and activity associated with these
recourse obligations are reported in the Corporate &
Institutional Banking segment.
Analysis of Commercial Mortgage Recourse Obligations
In millions 2011 2010
January 1 $54 $71
Reserve adjustments, net 1 9
Losses loan repurchases and settlements (8) (2)
Loan sales (24)
December 31 $47 $54
RESIDENTIAL MORTGAGE LOAN AND HOME EQUITY
REPURCHASE OBLIGATIONS
While residential mortgage loans are sold on a non-recourse
basis, we assume certain loan repurchase obligations
associated with mortgage loans we have sold to investors.
These loan repurchase obligations primarily relate to
situations where PNC is alleged to have breached certain
origination covenants and representations and warranties
made to purchasers of the loans in the respective purchase and
sale agreements. Residential mortgage loans covered by these
loan repurchase obligations include first and second-lien
mortgage loans we have sold through Agency securitizations,
Non-Agency securitizations, and whole-loan sale transactions.
As discussed in Note 3 in this Report, Agency securitizations
consist of mortgage loans sale transactions with FNMA,
FHLMC, and GNMA, while Non-Agency securitizations and
whole-loan sale transactions consist of mortgage loans sale
transactions with private investors. Our historical exposure
and activity associated with Agency securitization repurchase
obligations has primarily been related to transactions with
FNMA and FHLMC, as indemnification and repurchase losses
associated with FHA and VA-insured and uninsured loans
pooled in GNMA securitizations historically have been
minimal. Repurchase obligation activity associated with
residential mortgages is reported in the Residential Mortgage
Banking segment.
PNCs repurchase obligations also include certain brokered
home equity loans/lines that were sold to a limited number of
private investors in the financial services industry by National
City prior to our acquisition. PNC is no longer engaged in the
brokered home equity lending business, and our exposure
under these loan repurchase obligations is limited to
repurchases of whole-loans sold in these transactions.
Repurchase activity associated with brokered home equity
loans/lines is reported in the Non-Strategic Assets Portfolio
segment.
Loan covenants and representations and warranties are
established through loan sale agreements with various
investors to provide assurance that PNC has sold loans to
investors of sufficient investment quality. Key aspects of such
covenants and representations and warranties include the
loans compliance with any applicable loan criteria established
by the investor, including underwriting standards, delivery of
all required loan documents to the investor or its designated
party, sufficient collateral valuation, and the validity of the
lien securing the loan. As a result of alleged breaches of these
contractual obligations, investors may request PNC to
indemnify them against losses on certain loans or to
repurchase loans.
These investor indemnification or repurchase claims are
typically settled on an individual loan basis through make-
whole payments or loan repurchases; however, on occasion
we may negotiate pooled settlements with investors.
Indemnifications for loss or loan repurchases typically occur
when, after review of the claim, we agree insufficient
evidence exists to dispute the investors claim that a breach of
a loan covenant and representation and warranty has occurred,
such breach has not been cured, and the effect of such breach
is deemed to have had a material and adverse effect on the
value of the transferred loan. Depending on the sale agreement
and upon proper notice from the investor, we typically
respond to such indemnification and repurchase requests
within 60 days, although final resolution of the claim may take
a longer period of time. With the exception of the sales
The PNC Financial Services Group, Inc. Form 10-K 199
agreements associated with the Agency securitizations, most
sale agreements do not provide for penalties or other remedies
if we do not respond timely to investor indemnification or
repurchase requests.
Origination and sale of residential mortgages is an ongoing
business activity and, accordingly, management continually
assesses the need to recognize indemnification and repurchase
liabilities pursuant to the associated investor sale agreements.
We establish indemnification and repurchase liabilities for
estimated losses on sold first and second-lien mortgages and
home equity loans/lines for which indemnification is expected
to be provided or for loans that are expected to be
repurchased. For the first and second-lien mortgage sold
portfolio, we have established an indemnification and
repurchase liability pursuant to investor sale agreements based
on claims made and our estimate of future claims on a loan by
loan basis. These relate primarily to loans originated during
2006-2008. For the home equity loans/lines sold portfolio, we
have established indemnification and repurchase liabilities
based upon this same methodology for loans sold during
2005-2007.
Indemnification and repurchase liabilities are initially
recognized when loans are sold to investors and are
subsequently evaluated by management. Initial recognition
and subsequent adjustments to the indemnification and
repurchase liability for the sold residential mortgage portfolio
are recognized in Residential mortgage revenue on the
Consolidated Income Statement. Since PNC is no longer
engaged in the brokered home equity lending business, only
subsequent adjustments are recognized to the home equity
loans/lines indemnification and repurchase liability. These
adjustments are recognized in Other noninterest income on the
Consolidated Income Statement.
Managements subsequent evaluation of these indemnification
and repurchase liabilities is based upon trends in
indemnification and repurchase requests, actual loss
experience, risks in the underlying serviced loan portfolios,
and current economic conditions. As part of its evaluation,
management considers estimated loss projections over the life
of the subject loan portfolio. At December 31, 2011 and
December 31, 2010, the total indemnification and repurchase
liability for estimated losses on indemnification and
repurchase claims totaled $130 million and $294 million,
respectively, and was included in Other liabilities on the
Consolidated Balance Sheet. An analysis of the changes in this
liability during 2011 and 2010 follows:

Analysis of Indemnification and Repurchase Liability for Asserted Claims and Unasserted Claims

2011 2010
Residential Home Equity Residential Home Equity
In millions Mortgages (a) Loans/Lines (b) Total Mortgages (a) Loans/Lines (b) Total

January 1 $ 144 $150 $294 $229 $ 41 $270

Reserve adjustments, net 102 4 106 120 144 264
Losses loan repurchases and settlements (163) (107) (270) (205) (35) (240)
December 31 $ 83 $ 47 $130 $144 $150 $294
(a) Repurchase obligation associated with sold loan portfolios of $121.4 billion and $139.8 billion at December 31, 2011 and December 31, 2010, respectively.
(b) Repurchase obligation associated with sold loan portfolios of $4.5 billion and $6.5 billion at December 31, 2011 and December 31, 2010, respectively. PNC is no longer engaged in
the brokered home equity lending business, which was acquired with National City.

Management believes our indemnification and repurchase
liabilities appropriately reflect the estimated probable losses
on investor indemnification and repurchase claims at
December 31, 2011 and 2010. While management seeks to
obtain all relevant information in estimating the
indemnification and repurchase liability, the estimation
process is inherently uncertain and imprecise and,
accordingly, it is reasonably possible that future
indemnification and repurchase losses could be more or less
than our established liability. Factors that could affect our
estimate include the volume of valid claims driven by investor
strategies and behavior, our ability to successfully negotiate
claims with investors, housing prices, and other economic
conditions. At December 31, 2011, we estimate that it is
reasonably possible that we could incur additional losses in
excess of our indemnification and repurchase liability of up to
$85 million. This estimate of potential additional losses in
excess of our liability is based on assumed higher investor
demands, lower claim rescissions, and lower home prices than
our current assumptions.
REINSURANCE AGREEMENTS
We have two wholly-owned captive insurance subsidiaries
which provide reinsurance to third-party insurers related to
insurance sold to our customers. These subsidiaries enter into
various types of reinsurance agreements with third-party
insurers where the subsidiary assumes the risk of loss through
either an excess of loss or quota share agreement up to 100%
reinsurance. In excess of loss agreements, these subsidiaries
assume the risk of loss for an excess layer of coverage up to
specified limits, once a defined first loss percentage is met. In
quota share agreements, the subsidiaries and third-party
insurers share the responsibility for payment of all claims.
These subsidiaries provide reinsurance for accidental death &
dismemberment, credit life, accident & health, lender placed

200 The PNC Financial Services Group, Inc. Form 10-K

hazard, and borrower and lender paid mortgage insurance with NOTE 24 PARENT COMPANY
an aggregate maximum exposure up to the specified limits for Summarized financial information of the parent company is as
all reinsurance contracts as follows: follows:

Reinsurance Agreements Exposure Income Statement

December 31 December 31 Year ended December 31 - in millions 2011 2010 2009

In millions 2011 2010
Operating Revenue
Accidental Death & Dismemberment $2,255 $2,367
Dividends from:
Credit Life, Accident & Health 951 1,003 Bank subsidiaries and bank holding
Lender Placed Hazard (a) 2,899 709 company $2,513 $2,180 $ 839
Borrower and Lender Paid Mortgage Non-bank subsidiaries 131 575 84
Insurance 327 463 Interest income 1 12
Maximum Exposure $6,432 $4,542 Noninterest income 24 27 28
Percentage of reinsurance agreements: Total operating revenue 2,669 2,782 963
Excess of Loss Mortgage Insurance 4% 8% OPERATING EXPENSE
Quota Share 96% 92% Interest expense 333 458 495
Maximum Exposure to Quota Share Other expense 275 (61) 21
Agreements with 100% Reinsurance $ 950 $1,001 Total operating expense 608 397 516
(a) Transitioned to new Lender Placed Hazard reinsurance program in third quarter Income before income taxes and equity in
2010 that lowered risk to PNC through the reduction in percentage of risk assumed undistributed net income of subsidiaries 2,061 2,385 447
and the change from a stop loss feature to the purchase of catastrophe reinsurance.
Income tax benefits (113) (253) (147)
As such, should a catastrophe event occur PNC will benefit from this reinsurance.
No credit for the catastrophe reinsurance protection is applied to the gross exposure Income before equity in undistributed
figure. net income of subsidiaries 2,174 2,638 594
Equity in undistributed net income of
A rollforward of the reinsurance reserves for probable losses subsidiaries:
for 2011 and 2010 follows: Bank subsidiaries and bank holding
company 699 677 1,736
Reinsurance Reserves Rollforward Non-bank subsidiaries 183 97 117
Net income $3,056 $3,412 $2,447
In millions 2011 2010

January 1 $ 150 $220 Balance Sheet

Paid Losses (109) (118)
Net Provision 41 51
December 31 - in millions 2011 2010
Changes to Agreements (3)
ASSETS
December 31 $ 82 $150 Cash held at banking subsidiary $ 2 $ 151
Restricted deposits with banking subsidiary 400 250
Changes to agreements only represent entering into a new Interest-earning deposits 6 5
relationship or exiting an existing agreement entirely. The Investments in:
impact of changing the terms of existing agreements is Bank subsidiaries and bank holding
reflected in the net provision. company 35,355 34,049
Non-bank subsidiaries 2,036 1,951
There is a reasonable possibility that losses could be more Other assets 1,675 1,523
than or less than the amount reserved due to on-going Total assets $39,474 $37,929
uncertainty in various economic, social and other factors that LIABILITIES
could impact the frequency and severity of claims covered by Subordinated debt $ 3,303 $ 3,804
these reinsurance agreements. At December 31, 2011, the Senior debt 381 1,799
reasonably possible loss above our accrual was not material. Bank affiliate borrowings 144 112
Non-bank affiliate borrowings 631 964
REPURCHASE AND RESALE AGREEMENTS
Accrued expenses and other liabilities 962 1,008
We enter into repurchase and resale agreements where we
Total liabilities 5,421 7,687
transfer investment securities to/from a third party with the
agreement to repurchase/resell those investment securities at a EQUITY
future date for a specified price. These transactions are Shareholders equity 34,053 30,242
accounted for as collateralized borrowings/financings. Total liabilities and equity $39,474 $37,929

The PNC Financial Services Group, Inc. Form 10-K 201

 Year ended December 31 - in millions 2011 2010 2009
Commercial paper and all other debt issued by PNC Funding
FINANCING ACTIVITIES
Corp, a wholly owned finance subsidiary, is fully and
Borrowings from subsidiaries 4,660 7,580 3,420
unconditionally guaranteed by the parent company. In
Repayments on borrowings from subsidiaries (4,962) (6,596) (4,274)
addition, in connection with certain affiliates commercial and
Other borrowed funds (2,188) (379) (1,166)
residential mortgage servicing operations, the parent company
Preferred stock TARP (7,579)
has committed to maintain such affiliates net worth above
Preferred stock Other 987 (1)
minimum requirements.
Supervisory Capital Assessment Program
common stock 624
The Parent Company Balance Sheet at December 31, 2010 Common and treasury stock 72 3,474 247
reflects a $250 million revision to correct deposits with a Acquisition of treasury stock (73) (204) (188)
banking subsidiary that was previously reported as Cash and Preferred stock cash dividends paid (56) (146) (388)
due from banks and is now reported as Restricted deposits Common stock cash dividends paid (604) (204) (430)
with banking subsidiary. This change in classification has also Net cash provided (used) by financing
been reflected in the Parent Company Statement of Cash activities (2,164) (4,055) (2,155)
Flows as presented below. Management believes that the Increase (decrease) in cash and due from banks (149) 65 81
impact of this misstatement and correction is not material. Cash held at banking subsidiary at
beginning of year 151 86 5
Parent Company Interest Paid and Income Tax Refunds Cash held at banking subsidiary at end of
year $2 $151 $86
(Payments)
Income
Tax NOTE 25 SEGMENT REPORTING
Interest Refunds /
Year ended December 31 - in millions Paid (Payments) We have six reportable business segments:
2011 $361 $(130) Retail Banking
2010 419 342 Corporate & Institutional Banking
2009 427 137 Asset Management Group
Residential Mortgage Banking
BlackRock
Statement Of Cash Flows
Non-Strategic Assets Portfolio
Year ended December 31 - in millions 2011 2010 2009
OPERATING ACTIVITIES Results of individual businesses are presented based on our
Net income $3,056 $3,412 $2,447 management accounting practices and management structure.
Adjustments to reconcile net income to net There is no comprehensive, authoritative body of guidance for
cash provided by operating activities: management accounting equivalent to GAAP; therefore, the
Equity in undistributed net earnings of financial results of our individual businesses are not
subsidiaries (882) (774) (1,853) necessarily comparable with similar information for any other
Other (24) (53) 2,687 company. We refine our methodologies from time to time as
Net cash provided (used) by operating our management accounting practices are enhanced and our
activities 2,150 2,585 3,281
businesses and management structure change.
INVESTING ACTIVITIES
Net capital returned from (contributed to) Financial results are presented, to the extent practicable, as if
subsidiaries 50 1,766 (899)
each business operated on a stand-alone basis. Additionally,
Investment securities:
we have aggregated the results for corporate support functions
Sales and maturities 267
within Other for financial reporting purposes.
Purchases (228)
Net cash received from acquisitions 5 Assets receive a funding charge and liabilities and capital
Net change in Restricted deposits with receive a funding credit based on a transfer pricing
banking subsidiary (150) (232) (8)
methodology that incorporates product maturities, duration
Other (35) 1 (182)
and other factors.
Net cash provided (used) by investing
activities (135) 1,535 (1,045) A portion of capital is intended to cover unexpected losses and
is assigned to our business segments using our risk-based
economic capital model, including consideration of the
goodwill and other intangible assets at those business
segments, as well as the diversification of risk among the
business segments. We have revised certain capital allocations
among our business segments, including amounts for prior
periods. PNCs total capital did not change as a result of these
adjustments for any periods presented.

202 The PNC Financial Services Group, Inc. Form 10-K

We have allocated the allowances for loan and lease losses
and for unfunded loan commitments and letters of credit based
on our assessment of risk in each business segments loan
portfolio. Our allocation of the costs incurred by operations
and other shared support areas not directly aligned with the
businesses is primarily based on the use of services.
Total business segment financial results differ from
consolidated income from continuing operations before
noncontrolling interests, which itself excludes the earnings
and revenue attributable to GIS through June 30, 2010 and the
related third quarter 2010 after-tax gain on the sale of GIS that
are reflected in discontinued operations. The impact of these
differences is reflected in the Other category in the business
segment tables. Other includes residual activities that do not
meet the criteria for disclosure as a separate reportable
business, such as gains or losses related to BlackRock
transactions, integration costs, asset and liability management
activities including net securities gains or losses, other-than-
temporary impairment of investment securities and certain
trading activities, exited businesses, alternative investments,
including private equity, intercompany eliminations, most
corporate overhead, tax adjustments that are not allocated to
business segments, and differences between business segment
performance reporting and financial statement reporting
(GAAP), including the presentation of net income attributable
to noncontrolling interests as the segments results exclude
their portion of net income attributable to noncontrolling
interests. Assets, revenue and earnings attributable to foreign
activities were not material in the periods presented for
comparative purposes.
BUSINESS SEGMENT PRODUCTS AND SERVICES
Retail Banking provides deposit, lending, brokerage,
investment management, and cash management services to
consumer and small business customers within our primary
geographic markets. Our customers are serviced through our
branch network, call centers and online banking channels. The
branch network is located primarily in Pennsylvania, Ohio,
New Jersey, Michigan, Illinois, Maryland, Indiana, Kentucky,
Florida, Washington, D.C., Delaware, Virginia, Missouri,
Wisconsin and Georgia.
Corporate & Institutional Banking provides lending, treasury
management, and capital markets-related products and
services to mid-sized corporations, government and
not-for-profit entities, and selectively to large corporations.
Lending products include secured and unsecured loans, letters
of credit and equipment leases. Treasury management services
include cash and investment management, receivables
management, disbursement services, funds transfer services,
information reporting, and global trade services. Capital
markets-related products and services include foreign
exchange, derivatives, loan syndications, mergers and
acquisitions advisory and related services to middle-market
companies, our multi-seller conduit, securities underwriting,
and securities sales and trading. Corporate & Institutional
Banking also provides commercial loan servicing, and real
estate advisory and technology solutions for the commercial
real estate finance industry. Corporate & Institutional Banking
provides products and services generally within our primary
geographic markets, with certain products and services offered
nationally and internationally.
Asset Management Group includes personal wealth
management for high net worth and ultra high net worth
clients and institutional asset management. Wealth
management products and services include financial and
retirement planning, customized investment management,
private banking, tailored credit solutions and trust
management and administration for individuals and their
families. Institutional asset management provides investment
management, custody, and retirement planning services. The
institutional clients include corporations, unions,
municipalities, non-profits, foundations and endowments
located primarily in our geographic footprint.
Residential Mortgage Banking directly originates primarily
first lien residential mortgage loans on a nationwide basis with
a significant presence within the retail banking footprint, and
also originates loans through majority owned affiliates.
Mortgage loans represent loans collateralized by one-to-four-
family residential real estate. These loans are typically
underwritten to government agency and/or third-party
standards, and sold, servicing retained, to secondary mortgage
conduits FNMA, FHLMC, Federal Home Loan Banks and
third-party investors, or are securitized and issued under the
GNMA program. The mortgage servicing operation performs
all functions related to servicing mortgage loans primarily
those in first lien position for various investors and for loans
owned by PNC. Certain loans originated through majority
owned affiliates are sold to others.
BlackRock is a leader in investment management, risk
management and advisory services for institutional and retail
clients worldwide. BlackRock provides diversified investment
management services to institutional clients, intermediary and
individual investors through various investment vehicles.
Investment management services primarily consist of the
management of equity, fixed income, multi-asset class,
alternative investment and cash management products.
BlackRock offers its investment products in a variety of
vehicles, including open-end and closed-end mutual funds,
iShares exchange-traded funds (ETFs), collective
investment trusts and separate accounts. In addition,
BlackRock provides market risk management, financial
markets advisory and enterprise investment system services to
a broad base of clients. Financial markets advisory services
include valuation services relating to illiquid securities,
dispositions and workout assignments (including long-term
portfolio liquidation assignments), risk management and
strategic planning and execution. At December 31, 2011, our
economic interest in BlackRock was 21%.
The PNC Financial Services Group, Inc. Form 10-K 203
PNC received cash dividends from BlackRock of $212 million
during 2011, $178 million during 2010, and $134 million
during 2009.

Non-Strategic Assets Portfolio (formerly, Distressed Assets

Portfolio) includes commercial residential development loans,
cross-border leases, consumer brokered home equity loans,
retail mortgages, non-prime mortgages, and residential
construction loans. We obtained the majority of these
non-strategic assets through acquisitions of other companies,
and most of these assets fall outside of our core business
strategy.

204 The PNC Financial Services Group, Inc. Form 10-K

Results Of Businesses
Corporate & Asset Residential Non-Strategic
Year ended December 31 Retail Institutional Management Mortgage Assets
In millions Banking Banking Group Banking BlackRock Portfolio Other Consolidated
2011
Income Statement
Net interest income $ 3,278 $ 3,344 $ 238 $ 201 $ 913 $ 726 $ 8,700
Noninterest income 1,762 1,252 649 747 $ 464 47 705 5,626
Total revenue 5,040 4,596 887 948 464 960 1,431 14,326
Provision for credit losses (benefit) 891 (124) (24) 5 366 38 1,152
Depreciation and amortization 186 144 41 10 278 659
Other noninterest expense 3,917 1,686 646 787 275 1,135 8,446
Income (loss) from continuing operations
before income taxes and noncontrolling
interests 46 2,890 224 146 464 319 (20) 4,069
Income taxes (benefit) 15 1,015 83 59 103 119 (396) 998
Income from continuing operations before
noncontrolling interests $ 31 $ 1,875 $ 141 $ 87 $ 361 $ 200 $ 376 $ 3,071
Inter-segment revenue $ 1 $ 20 $ 13 $ 7 $ 16 $ (10) $ (47)
Average Assets (a) $66,448 $81,043 $6,719 $11,270 $5,516 $13,119 $81,220 $265,335
2010
Income Statement
Net interest income $ 3,433 $ 3,535 $ 256 $ 256 $ 1,229 $ 521 $ 9,230
Noninterest income 1,951 1,363 628 736 $ 462 (93) 899 5,946
Total revenue 5,384 4,898 884 992 462 1,136 1,420 15,176
Provision for credit losses 1,103 303 20 5 976 95 2,502
Depreciation and amortization 218 148 41 3 287 697
Other noninterest expense 3,838 1,673 606 560 250 989 7,916
Income (loss) from continuing operations
before income taxes and noncontrolling
interests 225 2,774 217 424 462 (90) 49 4,061
Income taxes (benefit) 81 980 80 155 111 (33) (337) 1,037
Income (loss) from continuing operations
before noncontrolling interests $ 144 $ 1,794 $ 137 $ 269 $ 351 $ (57) $ 386 $ 3,024
Inter-segment revenue $ 1 21 $ 13 $ 12 $ 22 $ (12) $ (57)
Average Assets (a) $67,428 $77,540 $6,954 $ 9,247 $5,428 $17,517 $80,788 $264,902
2009
Income Statement
Net interest income $ 3,520 $ 3,801 $ 308 $ 332 $ 1,079 $ 43 $ 9,083
Noninterest income 2,199 1,433 611 996 $ 262 74 1,570 7,145
Total revenue 5,719 5,234 919 1,328 262 1,153 1,613 16,228
Provision for credit losses (benefit) 1,330 1,603 97 (4) 771 133 3,930
Depreciation and amortization 263 141 41 5 323 773
Other noninterest expense 3,906 1,659 613 627 246 1,249 8,300
Income (loss) from continuing operations
before income taxes and noncontrolling
interests 220 1,831 168 700 262 136 (92) 3,225
Income taxes (benefit) 84 641 63 265 55 52 (293) 867
Income from continuing operations before
noncontrolling interests $ 136 $ 1,190 $ 105 $ 435 $ 207 $ 84 $ 201 $ 2,358
Inter-segment revenue $ (3) $ 11 $ 18 $ 6 $ 16 $ (17) $ (31)
Average Assets (a) $65,320 $84,689 $7,320 $ 8,420 $6,249 $22,844 $82,034 $276,876
(a) Period-end balances for BlackRock.

The PNC Financial Services Group, Inc. Form 10-K 205

STATISTICAL INFORMATION (UNAUDITED)
THE PNC FINANCIAL SERVICES GROUP, INC.
Selected Quarterly Financial Data
2011 2010
Dollars in millions,
except per share data Fourth Third Second First Fourth Third Second First

Summary Of Operations
Interest income $2,534 $2,530 $2,547 $2,583 $2,671 $2,701 $2,873 $2,905
Interest expense 335 355 397 407 470 486 438 526
Net interest income 2,199 2,175 2,150 2,176 2,201 2,215 2,435 2,379
Noninterest income (a) 1,350 1,369 1,452 1,455 1,702 1,383 1,477 1,384
Total revenue 3,549 3,544 3,602 3,631 3,903 3,598 3,912 3,763
Provision for credit losses 190 261 280 421 442 486 823 751
Noninterest expense 2,719 2,140 2,176 2,070 2,340 2,158 2,002 2,113
Income from continuing operations before income
taxes and noncontrolling interests 640 1,143 1,146 1,140 1,121 954 1,087 899
Income taxes 147 309 234 308 301 179 306 251
Income from continuing operations before
noncontrolling interests 493 834 912 832 820 775 781 648
Income from discontinued operations, net of
income taxes (b) 328 22 23
Net income 493 834 912 832 820 1,103 803 671
Less: Net income (loss) attributable to
noncontrolling interests 17 4 (1) (5) (3) 2 (9) (5)
Preferred stock dividends 24 4 24 4 24 4 25 93
Preferred stock discount accretion and
redemptions 1 1 1 3 1 250
Net income attributable to common shareholders $ 451 $ 826 $ 888 $ 833 $ 798 $1,094 $ 786 $ 333
Per Common Share Data
Book value $61.52 $61.92 $60.02 $58.01 $56.29 $55.91 $52.77 $50.32
Basic earnings (c)
Continuing operations 0.86 1.57 1.69 1.59 1.52 1.45 1.45 0.62
Discontinued operations (b) 0.63 0.04 0.05
Net income 0.86 1.57 1.69 1.59 1.52 2.08 1.49 0.67
Diluted earnings (c)
Continuing operations 0.85 1.55 1.67 1.57 1.50 1.45 1.43 0.61
Discontinued operations (b) 0.62 0.04 0.05
Net income 0.85 1.55 1.67 1.57 1.50 2.07 1.47 0.66
(a) Noninterest income included private equity gains/(losses) and net gains on sales of securities in each quarter as follows:

2011 2010
in millions Fourth Third Second First Fourth Third Second First

Private equity gains/(losses) $ 4 $46 $42 $53 $40 $63 $75 $41
Net gains on sales of securities 62 68 82 37 68 121 147 90
(b) Includes results of operations for PNC Global Investment Servicing Inc. (GIS) and the related after-tax gain on sale. We sold GIS effective July 1, 2010, resulting in a pretax gain
$639 million, or $328 million after taxes, recognized during the third quarter 2010.
(c) The sum of the quarterly amounts for 2011 and 2010 does not equal the respective years amount because the quarterly calculations are based on a changing number of average shares.

206 The PNC Financial Services Group, Inc. Form 10-K

Analysis Of Year-To-Year Changes In Net Interest Income
2011/2010 2010/2009
Increase/(Decrease) in Income/ Increase/(Decrease) in Income/
Expense Due to Changes in: Expense Due to Changes in:
Taxable-equivalent basis - in millions Volume Rate Total Volume Rate Total
Interest-Earning Assets
Investment securities
Securities available for sale
Residential mortgage-backed
Agency $ 91 $(108) $ (17) $ 69 $(196) $(127)
Non-agency (102) (62) (164) (170) (52) (222)
Commercial mortgage-backed (11) (22) (33) (56) (17) (73)
Asset-backed 35 (34) 1 18 (80) (62)
US Treasury and government agencies (87) (10) (97) 87 (13) 74
State and municipal 27 (15) 12 5 5
Other debt 15 (7) 8 42 (9) 33
Corporate stocks and other (3) (3)
Total securities available for sale (24) (266) (290) 132 (507) (375)
Securities held to maturity
Residential mortgage-backed 83 83
Commercial mortgage-backed 38 (24) 14 97 (14) 83
Asset-backed (33) (13) (46) 45 (49) (4)
State and municipal 12 12
Other 12 (8) 4 (2) 2
Total securities held to maturity 90 (23) 67 135 (56) 79
Total investment securities 69 (292) (223) 274 (570) (296)
Loans
Commercial 258 (222) 36 (363) (37) (400)
Commercial real estate (192) 26 (166) (222) (25) (247)
Equipment lease financing (3) (13) (16) 4 23 27
Consumer (18) (174) (192) 136 (16) 120
Residential real estate (176) (150) (326) (227) 100 (127)
Total loans (93) (571) (664) (644) 17 (627)
Loans held for sale (9) (61) (70) (87) 80 (7)
Federal funds sold and resale agreements 7 (11) (4) 1 (6) (5)
Other (15) 44 29 (100) 111 11
Total interest-earning assets $ (20) $(912) $(932) $(690) $(234) $(924)
Interest-Bearing Liabilities
Interest-bearing deposits
Money market $ 2 $ (79) $ (77) $ 27 $(314) $(287)
Demand 3 (13) (10) 4 (38) (34)
Savings 3 (1) 2 1 (2) (1)
Retail certificates of deposit (120) (80) (200) (197) (218) (415)
Other time (12) 3 (9) (75) 37 (38)
Time deposits in foreign offices (1) (1) (2) (1) (3)
Total interest-bearing deposits (38) (257) (295) (128) (650) (778)
Borrowed funds
Federal funds purchased and repurchase agreements (6) (6) (3) (3)
Federal Home Loan Bank borrowings (26) 8 (18) (70) (59) (129)
Bank notes and senior debt (38) (30) (68) (7) (116) (123)
Subordinated debt (36) (13) (49) (31) (64) (95)
Other 3 5 8 32 (17) 15
Total borrowed funds (102) (31) (133) (110) (225) (335)
Total interest-bearing liabilities (100) (328) (428) (231) (882) (1,113)
Change in net interest income $ (17) $(487) $(504) $(543) $ 732 $ 189

Changes attributable to rate/volume are prorated into rate and volume components.

The PNC Financial Services Group, Inc. Form 10-K 207

Average Consolidated Balance Sheet And Net Interest Analysis
2011 2010 2009
Interest Average Interest Average Interest Average
Taxable-equivalent basis Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
Dollars in millions Balances Expense Rates Balances Expense Rates Balances Expense Rates
Assets
Interest-earning assets:
Investment securities
Securities available for sale
Residential mortgage-backed
Agency $ 25,892 $ 894 3.45% $ 23,437 $ 911 3.89% $ 21,889 $ 1,038 4.74%
Non-agency 7,413 394 5.31 9,240 558 6.04 11,993 780 6.50
Commercial mortgage-backed 3,461 158 4.57 3,679 191 5.19 4,748 264 5.56
Asset-backed 3,402 84 2.47 2,240 83 3.71 1,963 145 7.39
US Treasury and government agencies 4,308 114 2.65 7,549 211 2.80 4,477 137 3.06
State and municipal 2,002 91 4.55 1,445 79 5.47 1,354 74 5.47
Other debt 3,350 87 2.60 2,783 79 2.84 1,327 46 3.47
Corporate stocks and other 428 448 398 3 .75
Total securities available for sale 50,256 1,822 3.63 50,821 2,112 4.16 48,149 2,487 5.17
Securities held to maturity
Residential mortgage-backed 2,424 83 3.42
Commercial mortgage-backed 4,444 220 4.95 3,711 206 5.55 1,990 123 6.18
Asset-backed 1,985 43 2.17 3,409 89 2.61 2,085 93 4.46
State and municipal 271 12 4.43 8 8
Other 308 10 3.25 41 6 14.63 63 6 9.52
Total securities held to maturity 9,432 368 3.90 7,169 301 4.20 4,146 222 5.35
Total investment securities 59,688 2,190 3.67 57,990 2,413 4.16 52,295 2,709 5.18
Loans
Commercial 59,437 2,924 4.92 54,339 2,888 5.31 61,183 3,288 5.37
Commercial real estate 16,767 879 5.24 20,435 1,045 5.11 24,775 1,292 5.21
Equipment lease financing 6,219 309 4.97 6,276 325 5.18 6,201 298 4.81
Consumer 54,669 2,673 4.89 55,015 2,865 5.21 52,368 2,745 5.24
Residential real estate 14,924 883 5.92 17,709 1,209 6.83 21,116 1,336 6.33
Total loans 152,016 7,668 5.04 153,774 8,332 5.42 165,643 8,959 5.41
Loans held for sale 2,768 193 6.97 2,871 263 9.16 3,976 270 6.79
Federal funds sold and resale agreements 2,297 33 1.44 1,899 37 1.95 1,865 42 2.25
Other 7,571 214 2.83 8,215 185 2.25 14,708 174 1.18
Total interest-earning assets/interest income 224,340 10,298 4.59 224,749 11,230 5.00 238,487 12,154 5.10
Noninterest-earning assets:
Allowance for loan and lease losses (4,656) (5,144) (4,316)
Cash and due from banks 3,565 3,569 3,648
Other 42,086 41,728 39,057
Total assets $265,335 $264,902 $276,876
Liabilities and Equity
Interest-bearing liabilities:
Interest-bearing deposits
Money market $ 58,765 $ 184 .31% $ 58,264 $ 261 .45% $ 55,326 $ 548 .99%
Demand 27,563 23 .08 25,025 33 .13 23,477 67 .29
Savings 8,185 15 .18 7,005 13 .19 6,495 14 .22
Retail certificates of deposit 34,009 428 1.26 42,933 628 1.46 54,584 1,043 1.91
Other time 405 13 3.21 813 22 2.71 5,009 60 1.20
Time deposits in foreign offices 2,410 5 .21 2,785 6 .22 3,637 9 .25
Total interest-bearing deposits 131,337 668 .51 136,825 963 .70 148,528 1,741 1.17
Borrowed funds
Federal funds purchased and repurchase agreements 4,469 7 .16 4,309 13 .30 4,439 16 .36
Federal Home Loan Bank borrowings 5,305 53 1.00 7,996 71 .89 14,177 200 1.41
Bank notes and senior debt 11,202 252 2.25 12,790 320 2.50 12,981 443 3.41
Subordinated debt 8,942 456 5.10 9,647 505 5.23 10,191 600 5.89
Other 5,808 58 1.00 5,438 50 .92 2,345 35 1.49
Total borrowed funds 35,726 826 2.31 40,180 959 2.39 44,133 1,294 2.93
Total interest-bearing liabilities/interest expense 167,063 1,494 .89 177,005 1,922 1.09 192,661 3,035 1.58
Noninterest-bearing liabilities and equity:
Noninterest-bearing deposits 51,707 45,076 41,416
Allowance for unfunded loan commitments and letters of credit 203 239 328
Accrued expenses and other liabilities 11,040 11,015 12,179
Equity 35,322 31,567 30,292
Total liabilities and equity $265,335 $264,902 $276,876
Interest rate spread 3.70 3.91 3.52
Impact of noninterest-bearing sources .22 .23 .30
Net interest income/margin $ 8,804 3.92% $ 9,308 4.14% $ 9,119 3.82%

208 The PNC Financial Services Group, Inc. Form 10-K

Nonaccrual loans are included in loans, net of unearned income. The impact of financial derivatives used in interest rate risk management is included in the interest
income/expense and average yields/rates of the related assets and liabilities. Basis adjustments related to hedged items are included in noninterest-earning assets and
noninterest-bearing liabilities. Average balances of securities are based on amortized historical cost (excluding adjustments to fair value, which are included in other
assets). Average balances for certain loans and borrowed funds accounted for at fair value, with changes in fair value recorded in trading noninterest income, are
included in noninterest-earning assets and noninterest-bearing liabilities. The interest-earning deposits with the Federal Reserve are included in the Other interest-
earning assets category.

Loan fees for the years ended December 31, 2011, 2010, and 2009 were $175 million, $154 million, and $162 million, respectively.

Interest income includes the effects of taxable-equivalent adjustments using a marginal federal income tax rate of 35% to increase tax-exempt interest income to a
taxable-equivalent basis. The taxable-equivalent adjustments to interest income for the years ended December 31, 2011, 2010, and 2009 were $104 million, $81
million, and $65 million, respectively.

LOANS OUTSTANDING
December 31 in millions 2011 (a) 2010 (a) 2009 (a) 2008 (a) 2007
Commercial lending
Commercial $ 65,694 $ 55,177 $ 54,818 $ 69,220 $28,952
Commercial real estate 16,204 17,934 23,131 25,736 8,903
Equipment lease financing 6,416 6,393 6,202 6,461 2,514
TOTAL COMMERCIAL LENDING 88,314 79,504 84,151 101,417 40,369
Consumer lending
Home equity 33,089 34,226 35,947 38,276 14,447
Residential real estate 14,469 15,999 19,810 21,583 9,557
Credit card 3,976 3,920 2,569 2,237 247
Other consumer 19,166 16,946 15,066 11,976 3,699
TOTAL CONSUMER LENDING 70,700 71,091 73,392 74,072 27,950
Total loans $159,014 $150,595 $157,543 $175,489 $68,319
(a) Includes the impact of National City, which we acquired on December 31, 2008.

NONPERFORMING ASSETS AND RELATED INFORMATION

December 31 - dollars in millions 2011 (a) 2010 (a) 2009 (a) 2008 (a) 2007
Nonperforming loans
Commercial $ 899 $1,253 $1,806 $ 576 $193
Commercial real estate 1,345 1,835 2,140 766 214
Equipment lease financing 22 77 130 97 3
TOTAL COMMERCIAL LENDING 2,266 3,165 4,076 1,439 410
Consumer (b)
Home equity 529 448 356 66 16
Residential real estate (c) 726 818 1,203 153 27
Credit card (d) 8
Other consumer 31 35 36 4 1
TOTAL CONSUMER LENDING 1,294 1,301 1,595 223 44
Total nonperforming loans (e) 3,560 4,466 5,671 1,662 454
OREO and foreclosed assets
Other real estate owned (OREO) (f) 561 589 484 422 41
Foreclosed and other assets 35 68 49 16
TOTAL OREO AND FORECLOSED ASSETS 596 657 533 438 41
Total nonperforming assets $4,156 $5,123 $6,204 $2,100 $495
Nonperforming loans to total loans 2.24% 2.97% 3.60% .95% .66%
Nonperforming assets to total loans, OREO and foreclosed assets 2.60 3.39 3.92 1.19 .72
Nonperforming assets to total assets 1.53 1.94 2.30 .72 .36
Interest on nonperforming loans
Computed on original terms $ 278 $ 329 $ 302 $ 115 $ 51
Recognized prior to nonperforming status 47 53 90 60 32
Past due loans
Accruing loans past due 90 days or more (g) $2,973 $2,709 $2,698 $1,321 $136
As a percentage of total loans 1.87% 1.80% 1.71% .75% .20%
Past due loans held for sale
Accruing loans held for sale past due 90 days or more (h) $ 49 $ 65 $ 72 $ 40 $ 8
As a percentage of total loans held for sale 1.67% 1.86% 2.84% .92% .20%

The PNC Financial Services Group, Inc. Form 10-K 209

(a) Includes the impact of National City, which we acquired on December 31, 2008.
(b) Excludes most consumer loans and lines of credit, not secured by residential real estate, which are charged off after 120 to 180 days past due and are not placed on nonperforming
status.
(c) Effective in 2011, nonperforming residential real estate excludes loans of $61 million accounted for under the fair value option as of December 31, 2011. The comparable balances for
prior periods presented were not material.
(d) Effective in the second quarter 2011, the commercial nonaccrual policy was applied to certain small business credit card balances. This change resulted in loans being placed on
nonaccrual status when they become 90 days or more past due. We continue to charge off these loans at 180 days past due.
(e) Includes TDRs of $1,141 million at December 31, 2011, $784 million at December 31, 2010, $440 million at December 31, 2009 and $2 million at December 31, 2007.
Nonperforming loans do not include government insured or guaranteed loans, loans held for sale, loans accounted for under the fair value option and purchased impaired loans.
(f) Other real estate owned excludes $280 million, $178 million, $112 million, $81 million and zero at December 31, 2011, December 31, 2010, December 31, 2009, December 31, 2008
and December 31, 2007, respectively, related to residential real estate that was acquired by us upon foreclosure of serviced loans because they are insured by the Federal Housing
Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).
(g) Amounts include government insured or guaranteed consumer loans totaling $2,474 million, $2,167 million, $1,814 million, $926 million and $8 million at December 31,
2011, December 31, 2010, December 31, 2009, December 31, 2008 and December 31, 2007, respectively. Past due loan amounts exclude purchased impaired loans as they are
considered current loans due to the accretion of interest income.
(h) Amounts include government insured or guaranteed consumer loans held for sale totaling $15 million, $22 million, and $27 million at December 31, 2011, December 31, 2010, and
December 31, 2009, respectively. Government insured or guaranteed consumer loans held for sale were zero for the other periods presented.

SUMMARY OF LOAN LOSS EXPERIENCE

Year ended December 31 - dollars in millions 2011 2010 2009 2008 2007

Allowance for loan and lease losses January 1 $ 4,887 $ 5,072 $ 3,917 $ 830 $ 560
Charge-offs
Commercial (700) (1,227) (1,276) (301) (156)
Commercial real estate (464) (670) (510) (165) (16)
Equipment lease financing (35) (120) (149) (3)
Consumer (a) (912) (1,069) (961) (143) (73)
Residential real estate (153) (406) (259) (6)
Total charge-offs (2,264) (3,492) (3,155) (618) (245)
Recoveries
Commercial 332 294 181 53 30
Commercial real estate 105 77 38 10 1
Equipment lease financing 50 56 27 1
Consumer (a) 127 110 105 15 14
Residential real estate 11 19 93
Total recoveries 625 556 444 79 45
Net charge-offs (1,639) (2,936) (2,711) (539) (200)
Provision for credit losses (b) 1,152 2,502 3,930 1,517 315
Acquired allowance National City (112) 2,224
Other (1) 20 152
Adoption of ASU 2009-17, Consolidations 141
Net change in allowance for unfunded loan commitments and letters of credit (52) 108 48 (135) 3
Allowance for loan and lease losses December 31 $ 4,347 $ 4,887 $ 5,072 $3,917 $ 830
Allowance as a percent of December 31:
Loans 2.73% 3.25% 3.22% 2.23% 1.21%
Nonperforming loans 122 109 89 236 183
As a percent of average loans
Net charge-offs 1.08 1.91 1.64 .74 .32
Provision for credit losses .76 1.63 2.37 2.09 .50
Allowance for loan and lease losses 2.86 3.18 3.06 5.38 1.33
Allowance as a multiple of net charge-offs 2.65x 1.66x 1.87x 7.27x 4.15x
(a) Includes home equity, credit card and other consumer.
(b) Amount for 2008 included a $504 million conforming provision for credit losses related to National City.

210 The PNC Financial Services Group, Inc. Form 10-K

The following table presents the assignment of the allowance for loan and lease losses and the categories of loans as a percentage
of total loans. Changes in the allocation over time reflect the changes in loan portfolio composition, risk profile and refinements to
reserve methodologies. For purposes of this presentation, a portion of the allowance for loan and lease losses has been assigned to
loan categories based on the relative specific and pool allocation amounts to provide coverage for probable losses not covered in
specific, pool and consumer reserve methodologies related to qualitative and measurement factors. At December 31, 2011, the
portion of the reserves for these factors was $16 million.

ALLOCATION OF ALLOWANCE FOR LOAN AND LEASE LOSSES

2011 2010 2009 2008 2007

December 31 Loans to Loans to Loans to Loans to Loans to
Dollars in millions Allowance Total Loans Allowance Total Loans Allowance Total Loans Allowance Total Loans Allowance Total Loans
Commercial $1,180 41.3% $1,387 36.7% $1,869 34.8% $1,668 39.4% $564 42.4%
Commercial real estate 753 10.2 1,086 11.9 1,305 14.7 833 14.7 153 13.0
Equipment lease financing 62 4.0 94 4.2 171 3.9 179 3.7 36 3.7
Consumer (a) 1,458 35.4 1,227 36.6 957 34.0 929 29.9 68 26.9
Residential real estate 894 9.1 1,093 10.6 770 12.6 308 12.3 9 14.0
Total $4,347 100.0% $4,887 100.0% $5,072 100.0% $3,917 100.0% $830 100.0%
(a) Includes home equity, credit card and other consumer.

SELECTED LOAN MATURITIES AND INTEREST SENSITIVITY The following table sets forth maturities of domestic time
deposits of $100,000 or more:
December 31, 2011 1 Year 1 Through After 5 Gross
In millions or Less 5 Years Years Loans
Domestic
Commercial $20,508 $37,031 $8,155 $65,694 Certificates
December 31, 2011 in millions of Deposit
Commercial real estate -
Three months or less $3,534
Real estate projects 6,014 4,442 184 10,640
Over three through six months 1,908
Total $26,522 $41,473 $8,339 $76,334
Over six through twelve months 1,835
Loans with:
Over twelve months 2,093
Predetermined rate $ 5,546 $ 9,585 $2,635 $17,766
Total $9,370
Floating or adjustable
rate 20,976 31,888 5,704 58,568
Total $26,522 $41,473 $8,339 $76,334 COMMON STOCK PRICES/DIVIDENDS DECLARED
The table below sets forth by quarter the range of high and
low sale and quarter-end closing prices for The PNC Financial
At December 31, 2011, we had no pay-fixed interest rate swaps
Services Group, Inc. common stock and the cash dividends
designated to commercial loans as part of fair value hedge
declared per common share.
strategies. At December 31, 2011, $13.9 billion notional amount
of receive-fixed interest rate swaps were designated as part of Cash
cash flow hedging strategies that converted the floating rate (1 Dividends
High Low Close Declared
month and 3 month LIBOR) on the underlying commercial loans
to a fixed rate as part of risk management strategies. 2011 Quarter
First $65.19 $59.67 $62.99 $ .10
TIME DEPOSITS OF $100,000 OR MORE Second 64.37 55.56 59.61 .35
Time deposits in foreign offices totaled $1.8 billion at Third 61.21 42.70 48.19 .35
December 31, 2011, substantially all of which were in
Fourth 58.70 44.74 57.67 .35
denominations of $100,000 or more.
Total $1.15
2010 Quarter
First $61.80 $50.46 $59.70 $ .10
Second 70.45 56.30 56.50 .10
Third 62.99 49.43 51.91 .10
Fourth 61.79 50.69 60.72 .10
Total $ .40

The PNC Financial Services Group, Inc. Form 10-K 211

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
(a) None.
(b) None.
ITEM 9A CONTROLS AND PROCEDURES
(a) Managements Report on Internal Control over
Financial Reporting
The management of The PNC Financial Services Group,
Inc. and subsidiaries (PNC) is responsible for
establishing and maintaining adequate internal control
over financial reporting, as such term is defined in the
Exchange Act Rule 13a-15(f).
Because of inherent limitations, internal control over
financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in
conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
We performed an evaluation under the supervision and
with the participation of our management, including the
Chairman and Chief Executive Officer and the Executive
Vice President and Chief Financial Officer, of the
effectiveness of PNCs internal control over financial
reporting as of December 31, 2011. This assessment was
based on criteria for effective internal control over
financial reporting described in Internal Control-
Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Based on this assessment, management concluded that
PNC maintained effective internal control over financial
reporting as of December 31, 2011.
PricewaterhouseCoopers LLP, the independent registered
public accounting firm that audited our consolidated
financial statements as of and for the year ended
December 31, 2011 included in this Report, has also
audited the effectiveness of PNCs internal control over
financial reporting as of December 31, 2011. The report
of PricewaterhouseCoopers LLP is included under Item 8
of this Annual Report on Form 10-K.
(b) Disclosure Controls and Procedures and Changes in
Internal Control over Financial Reporting
As of December 31, 2011, we performed an evaluation
under the supervision and with the participation of our
management, including the Chairman and Chief
Executive Officer and the Executive Vice President and
212 The PNC Financial Services Group, Inc. Form 10-K
Chief Financial Officer, of the effectiveness of the design
and operation of our disclosure controls and procedures
and of changes in our internal control over financial
reporting.
Based on that evaluation, our Chairman and Chief
Executive Officer and our Executive Vice President and
Chief Financial Officer concluded that our disclosure
controls and procedures (as defined in Rule 13a-15(e)
under the Securities and Exchange Act of 1934, as
amended) were effective as of December 31, 2011, and
that there has been no change in PNCs internal control
over financial reporting that occurred during the fourth
quarter of 2011 that has materially affected, or is
reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 9B OTHER INFORMATION
None.
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
Certain of the information regarding our directors (or
nominees for director), executive officers and Audit
Committee (and Audit Committee financial experts), required
by this item is included under the captions Election of
Directors (Item 1), and Corporate Governance Board
committees Audit Committee, and Director and Executive
Officer Relationships Family relationships in our Proxy
Statement to be filed for the 2012 annual meeting of
shareholders and is incorporated herein by reference.
Information regarding our compliance with Section 16(a) of
the Securities Exchange Act of 1934 is included under the
caption Director and Executive Officer Relationships
Section 16(a) beneficial ownership reporting compliance in
our Proxy Statement to be filed for the 2012 annual meeting of
shareholders and is incorporated herein by reference.
Additional information regarding our executive officers and
our directors is included in Part I of this Report under the
captions Executive Officers of the Registrant and Directors
of the Registrant.
Certain information regarding our PNC Code of Business
Conduct and Ethics required by this item is included under the
caption Corporate Governance Our code of ethics in our
Proxy Statement to be filed for the 2012 annual meeting of
shareholders and is incorporated herein by reference. Our
PNC Code of Business Conduct and Ethics is available on our
corporate website at www.pnc.com/corporategovernance. In
addition, any future amendments to, or waivers from, a
provision of the PNC Code of Business Conduct and Ethics
that applies to our directors or executive officers (including
the Chairman and Chief Executive Officer, the Chief Financial
Officer and the Controller) will be posted at this internet
address.
ITEM 11 EXECUTIVE COMPENSATION
The information required by this item is included under the
captions Corporate Governance Board committees
Personnel and Compensation Committee Compensation
committee interlocks and insider participation, Director
Compensation, Compensation Discussion and Analysis,
Compensation Committee Report, Compensation and
Risk, and Compensation Tables in our Proxy Statement to
be filed for the 2012 annual meeting of shareholders and is
incorporated herein by reference. In accordance with
Item 407(e) (5) of Regulation S-K, the information set forth
under the caption Compensation Committee Report in such
Proxy Statement will be deemed to be furnished in this Report
and will not be deemed to be incorporated by reference into
any filing under the Securities Act or the Exchange Act as a
result of furnishing the disclosure in this manner.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this item regarding security
ownership of certain beneficial owners and management is
included under the caption Security Ownership of Directors
and Executive Officers in our Proxy Statement to be filed for
the 2012 annual meeting of shareholders and is incorporated
herein by reference.
Information regarding our compensation plans under which
PNC equity securities are authorized for issuance as of
December 31, 2011 is included in the table which follows.
Also included in the notes to the table is information regarding
awards or portions of awards under our 2006 Incentive Award
Plan that, by their terms, are payable only in cash. Additional
information regarding these plans is included in Note 15
Stock-Based Compensation Plans in the Notes To
Consolidated Financial Statements in Item 8 of this Report.

Equity Compensation Plan Information

At December 31, 2011

(a) (b) (c)

Number of securities
remaining available
Number of securities Weighted-average for future issuance
to be issued upon exercise price under equity
exercise of of outstanding compensation plans
outstanding options, options, warrants (excluding securities
warrants and rights and rights reflected in column (a))

Equity compensation plans approved by security holders

1997 Long-Term Incentive Award Plan (Note 1) 1,945,317
Stock Options 5,653,196 $ 60.08
2006 Incentive Award Plan (Note 2 and Note 3)
Stock Options 11,770,825 $ 51.69 31,830,226
Incentive Performance Unit Awards (Note 4) 394,048 N/A
Stock-Payable Restricted Stock Units (Note 5) 561,147 N/A
1996 Executive Incentive Award Plan
Incentive Awards N/A (Note 6)
Employee Stock Purchase Plan (Note 7) 1,528,879
Total approved by security holders 18,379,216 35,304,422
Equity compensation plans not approved by security holders (Note 8)
Former National City Corporation Equity-Based Compensation Plans,
including stock options 1,818,244 $684.40
Former Sterling Financial Corporation Stock Option Plan 65,760 $ 71.81
Total not approved by security holders 1,884,004
Total 20,263,220 35,304,422
N/A not applicable

The PNC Financial Services Group, Inc. Form 10-K 213

Note 1 After shareholder approval of the 2006 Incentive
Award Plan at the 2006 annual meeting of PNCs shareholders
on April 25, 2006 (see Note 2 below), no further grants were
permitted under the 1997 Long-Term Incentive Award Plan,
other than for the exercise of options still subject to a reload
feature. As of December 31, 2011, the number of remaining
shares reserved under this plan for that purpose was
1,945,317.
Note 2 The 2006 Incentive Award Plan was adopted by the
Board on February 15, 2006 and approved by the PNC
shareholders at the 2006 annual meeting on April 25, 2006.
The plan initially authorized up to 40,000,000 shares of
common stock for issuance under the plan, subject to
adjustment in certain circumstances. If and to the extent that
stock options and stock appreciation rights (SARs) granted
under the plan, or granted under the prior plan and outstanding
on the approval date of the plan, terminate, expire or are
cancelled, forfeited, exchanged or surrendered after the
effective date of the plan without being exercised or if any
share awards, share units, dividend equivalents or other share-
based awards are forfeited or terminated, or otherwise not paid
in full, after the effective date of the plan, the shares subject to
such grants become available again for purposes of the plan.
Shares available for issuance under this plan are also reduced
by the number of any shares used in payment of bonuses
under the 1996 Executive Incentive Award Plan.
The plan was most recently amended and restated
incorporating amendments adopted by the Board and
approved by PNCs shareholders at the 2011 annual meeting
of shareholders, effective as of March 11, 2011. These
amendments incorporate, among other things, an increase to
the overall limit on the number of shares that may be awarded
under the plan to 46,000,000, and a new requirement that each
award of a share (other than pursuant to a stock option or
SAR) granted after that effective date will reduce the
aggregate plan limit by 2.5 shares, while each award of a share
pursuant to a stock option or SAR will reduce the aggregate
plan limit by one share.
Note 3 Under the 2006 Incentive Award Plan, awards or
portions of awards that, by their terms, are payable only in
cash do not reduce the number of shares that remain available
for issuance under the plan (the number in column (c)).
During 2011, a total of 560,544 cash-payable share units plus
cash-payable dividend equivalents with respect to 505,866 of
those share units were granted under the plan. This number
includes an incremental change in the cash-payable portion of
the 2010 and 2011 incentive performance unit award grants
described in Note 4 below (net of forfeitures), a separate 2011
incentive performance unit award grant payable solely in cash,
and 2011 grants of share units (some of which include rights
to cash dividend equivalents) payable solely in cash. Payments
are subject to the conditions of the individual grants,
214 The PNC Financial Services Group, Inc. Form 10-K
including, where applicable, the achievement of any
performance goals or service requirement established for such
grants. The comparable amount for 2009 was 1,030,824 cash-
payable share units plus cash-payable dividend equivalents
with respect to 379,979 cash-payable restricted share units,
and the comparable amount for 2010 was 367,365 cash-
payable share units plus cash-payable dividend equivalents
with respect to 211,573 cash-payable restricted share units.
Note 4 These incentive performance unit awards provide for
the issuance of shares of common stock (up to a target number
of shares) based on the degree to which corporate performance
goals established by the Personnel and Compensation
Committee have been achieved, subject to potential negative
adjustment based on certain risk-related performance metrics,
and, if a premium level of such performance is achieved, for
further payment in cash. The numbers in column (a) of this
table for these awards reflect the maximum number of shares
that could be issued pursuant to grants outstanding at
December 31, 2011 upon achievement of the performance
goals and other conditions of the grants. At the premium level
of performance, a further maximum payout of cash
equivalents for the same number of share units, plus the
incremental change described in Note 3, could also be payable
subject to the other conditions of the grants. Grants under the
2006 Incentive Award Plan were made in the first quarter of
2008, 2010, and 2011.
Note 5 These stock-payable restricted stock units include
2011 grants of performance-based restricted share units (with
the units payable solely in stock and related dividend
equivalents payable solely in cash) that have a service
condition, an internal risk-related performance condition and a
market condition. The number in column (a) includes the
maximum number of shares that could be issued pursuant to
grants of this type of award outstanding at December 31, 2011
upon achievement of the performance and market conditions
and other conditions of the grants. Cash-payable dividend
equivalents were granted with respect to all of these stock-
payable restricted stock units.
Note 6 The 1996 Executive Incentive Award Plan is a
shareholder-approved plan that enables PNC to pay annual
bonuses to its senior executive officers based upon the
achievement of specified levels of performance. The plan as
amended and restated as of January 1, 2007 was adopted by
the Board on February 14, 2007 and approved by the PNC
shareholders at the 2007 annual meeting on April 24, 2007.
The plan does not specify a fixed share amount for awards
under the plan. Rather, it provides for maximum bonus awards
for a given period (generally a year) for each individual plan
participant of 0.2% of incentive income for that period.
Incentive income is based on PNCs consolidated pre-tax net
income as further adjusted for the impact of changes in
tax law, extraordinary items, discontinued operations,
acquisition and merger integration costs, and for the impact of
PNCs obligation to fund certain BlackRock long-term
incentive programs. Although the size of awards under the
plan is dollar-denominated, payment may be made in cash, in
stock, or in a combination of cash and stock.
Note 7 The purchase price for shares sold under the plan
represents 95% of the fair market value on the last day of each
six-month offering period.
Note 8 The plans in this section of the table reflect awards
under pre-acquisition plans of National City Corporation and
Sterling Financial Corporation, respectively. National City
was merged into PNC on December 31, 2008 and Sterling was
merged into PNC on April 4, 2008. Pursuant to the respective
merger agreements for these acquisitions, common shares of
National City or Sterling, as the case may be, issuable upon
the exercise or settlement of various equity awards granted
under the National City or Sterling plans were converted into
corresponding awards covering PNC common stock.
Additional information is included in Note 15 Stock-Based
Compensation Plans in the Notes To Consolidated Financial
Statements in Item 8 of this Report and in Note 16 Stock-
Based Compensation Plans in the Notes To Consolidated
Financial Statements in Item 8 of our 2008 10-K.
ITEM 13 CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this item is included under the
captions Director and Executive Officer Relationships
Director independence, Transactions with directors,
Indemnification and advancement of costs, and Related
person transactions policies and procedures in our Proxy
Statement to be filed for the 2012 annual meeting of
shareholders and is incorporated herein by reference.
ITEM 14 PRINCIPAL ACCOUNTING FEES AND
SERVICES
The information required by this item is included under the
caption Ratification of Independent Registered Public
Accounting Firm (Item 2) Audit and non-audit fees in our
Proxy Statement to be filed for the 2012 annual meeting of
shareholders and is incorporated herein by reference.
PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT
SCHEDULES
FINANCIAL STATEMENTS, FINANCIAL
STATEMENT SCHEDULES
Our consolidated financial statements required in response to
this Item are incorporated by reference from Item 8 of this
Report.
Audited consolidated financial statements of BlackRock, Inc.
as of December 31, 2011 and 2010 and for each of the three
years in the period ended December 31, 2011 are filed with
this Report as Exhibit 99.2 and incorporated herein by
reference.
EXHIBITS
Our exhibits listed on the Exhibit Index on pages E-1 through
E-8 of this Form 10-K are filed with this Report or are
incorporated herein by reference.
The PNC Financial Services Group, Inc. Form 10-K 215
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

The PNC Financial Services Group, Inc.

(Registrant)

By: /s/ Richard J. Johnson

Richard J. Johnson
Executive Vice President and Chief Financial Officer
February 29, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of The PNC Financial Services Group, Inc. and in the capacities indicated on February 29, 2012.

Signature Capacities

/s/ James E. Rohr Chairman, Chief Executive Officer and Director

James E. Rohr (Principal Executive Officer)

/s/ Richard J. Johnson Executive Vice President and Chief Financial Officer
Richard J. Johnson (Principal Financial Officer)

/s/ Gregory H. Kozich Senior Vice President and Controller

Gregory H. Kozich (Principal Accounting Officer)

* Richard O. Berndt; Charles E. Bunch; Paul W. Chellgren; Kay Directors

Coles James; Richard B. Kelson; Bruce C. Lindsay; Anthony A.
Massaro; Jane G. Pepper; Donald J. Shepard; Lorene K. Steffes;
Dennis F. Strigl; Thomas J. Usher; George H. Walls, Jr.; and
Helge H. Wehmeier

*By: /s/ George P. Long, III

George P. Long, III, Attorney-in-Fact,
pursuant to Powers of Attorney filed
herewith

216 The PNC Financial Services Group, Inc. Form 10-K

 Exhibit Index

Exhibit
No. Description Method of Filing +

2.1 Stock Purchase Agreement, dated as of June 19, 2011, among
the corporation, RBC USA Holdco Corporation and Royal
Bank of Canada (the schedules and exhibits have been omitted
pursuant to Item 601(b)(2) of Regulation S-K)
3.1 Articles of Incorporation of the Corporation, as amended
effective as of January 2, 2009
3.2 Statement with Respect to Shares of Fixed-to-Floating Rate
Non-Cumulative Perpetual Preferred Stock, Series O dated
July 21, 2011
3.3 By-Laws of the Corporation, as amended and restated effective
as of February 12, 2009
4.1 There are no instruments with respect to long-term debt of the
Corporation and its subsidiaries that involve securities percent
of the total assets of the Corporation and its subsidiaries on a
consolidated basis. The Corporation agrees to provide the SEC
with a copy of instruments defining the rights of holders of
long- term debt of the Corporation and its subsidiaries on
request.
4.2 Terms of $1.80 Cumulative Convertible Preferred Stock,
Series B
4.3 Terms of 7.00% Non-Cumulative Preferred Stock, Series H
4.4 Terms of Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series I
4.5 Terms of Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series J
4.6 Terms of Fixed-to-Floating Non-Cumulative Perpetual Preferred
Stock, Series K
4.7 Terms of 9.875% Fixed-to-Floating Rate Non-Cumulative
Preferred Stock, Series L
4.8 Terms of Non-Cumulative Perpetual Preferred Stock, Series M
4.9 Terms of Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series O
4.10 Warrants for Purchase of Shares of PNC Common Stock
4.11 Deposit Agreement dated May 21, 2008, between the
Corporation, PNC Bank, National Association, and the holders
from time to time of the Depositary Receipts described therein
Incorporated herein by reference to Exhibit 2.1 of
the Corporations Current Report on Form 8-K
filed June 20, 2011
Incorporated herein by reference to Exhibit 3.1 to
the Corporations Annual Report on Form 10-K
for the year ended December 31, 2008 (2008
Form 10-K)
Incorporated herein by reference to Exhibit 3.1 of
the Corporations Current Report on Form 8-K
filed July 27, 2011
Incorporated herein by reference to Exhibit 3.2 of
the Corporations Current Report on Form 8-K
filed February 19, 2009
Incorporated herein by reference to Exhibit 3.1 the
Corporations 2008 Form 10-K
Incorporated herein by reference to Exhibit 3.1 the
Corporations 2008 Form 10-K
Incorporated herein by reference to Exhibit 3.1 the
Corporations 2008 Form 10-K
Incorporated herein by reference to Exhibit 3.1 the
Corporations 2008 Form 10-K
Incorporated herein by reference to Exhibit 3.1 the
Corporations 2008 Form 10-K
Incorporated herein by reference to Exhibit 3.1 the
Corporations 2008 Form 10-K
Incorporated herein by reference to Exhibit 3.1 the
Corporations 2008 Form 10-K
Incorporated herein by reference to Exhibit 3.1 of
the Corporations Current Report on Form 8-K
filed July 27, 2011
Incorporated herein by reference to Exhibit 4.2
(included as part of Exhibit 4.1) of the
Corporations Form 8-A filed April 30, 2010
Incorporated herein by reference to Exhibit 4.3 of
the Corporations Current Report on Form 8-K
filed May 27, 2008

PNC Financial Services Group, Inc. Form 10-K E-1

 4.12 Deposit Agreement dated January 30, 2008 by and among
National City Corporation, Wilmington Trust Company,
National City Bank as Transfer Agent and Registrar, and all
holders from time to time of Receipts issued pursuant thereto
4.13 Letter Agreement dated as of December 31, 2008 between the
Corporation and Wilmington Trust Company
4.14 Deposit Agreement dated July 27, 2011, between the
Corporation, Computershare Trust Company, N.A.,
Computershare Inc. and the holders from time to time of the
Depositary Receipts described therein
4.15 Stock Purchase Contract between National City Corporation and
National City Preferred Capital Trust I acting through the
Bank of New York Trust Company, N.A. as Property Trustee,
dated January 30, 2008
4.16 Form of PNC Bank, National Association Global Bank Note for
Fixed Rate Global Senior Bank Note with Maturity of more
than Nine Months from Date of Issuance
4.17 Form of PNC Bank, National Association Global Bank Note for
Floating Rate Global Senior Bank Note with Maturity of more
Nine Months from Date of Issuance
4.18 Form of PNC Bank, National Association Global Bank Note for
Fixed Rate Global Subordinated Bank Note with Maturity of
more than Nine Months from Date of Issuance
4.19 Form of PNC Bank, National Association Global Bank Note for
Floating Rate Global Subordinated Bank Note with Maturity
of more Nine Months from Date of Issuance
4.20 Exchange Agreement, dated as of March 29, 2007, by and
among the Corporation, PNC Bank, National Association, and
PNC Preferred Funding Trust II
4.21 First Supplemental Indenture, dated as of February 13, 2008,
between the Corporation and The Bank of New York
4.22 Exchange Agreement, dated as of February 19, 2008, by and
among the Corporation, PNC Bank, National Association, and
PNC Preferred Funding Trust III
10.1 The Corporations Supplemental Executive Retirement Plan, as
amended and restated
10.2 The Corporations Supplemental Executive Retirement Plan, as
amended and restated effective January 1, 2009
10.3 Amendment 2009-1 to the Corporations Supplemental
Executive Retirement Plan as amended and restated as of
January 1, 2009
10.4 The Corporations ERISA Excess Pension Plan, as amended and
restated
E-2 PNC Financial Services Group, Inc. Form 10-K
Incorporated herein by reference to Exhibit 4.2 of
the Form 8-A filed by National City
Corporation on January 30, 2008
Incorporated herein by reference to Exhibit 4.4 of
the Corporations Form 8-A filed December 31,
2008
Incorporated herein by reference to Exhibit 4.2 of
the Corporations Current Report on Form 8-K
filed July 27, 2011
Incorporated herein by reference to Exhibit 4.7 of
the Form 8-A filed by National City
Corporation (Commission File No. 001-10074)
on January 30, 2008
Incorporated herein by reference to Exhibit 4.9 of
the Corporations Quarterly Report on
Form 10-Q for the quarter ended September 30,
2004 (3rd Quarter 2004 Form 10-Q)
Incorporated herein by reference to Exhibit 4.10 of
the Corporations 3rd Quarter 2004 Form 10-Q
Incorporated herein by reference to Exhibit 4.11 of
the Corporations 3rd Quarter 2004 Form 10-Q
Incorporated herein by reference to Exhibit 4.12 of
the Corporations 3rd Quarter 2004 Form 10-Q
Incorporated herein by reference to Exhibit 4.16 of
the Corporations Current Report on Form 8-K
filed March 30, 2007
Incorporated herein by reference to Exhibit 4.4 of
the Corporations Current Report on Form 8-K
filed February 13, 2008
Incorporated herein by reference to Exhibit 99.1 of
the Corporations Current Report on Form 8-K
filed February 19, 2008
Incorporated herein by reference to Exhibit 10.1 of
the Corporations Quarterly Report on
Form 10-Q for the quarter ended June 30, 2004
(2nd Quarter 2004 Form 10-Q)*
Incorporated herein by reference to Exhibit 10.2 to
the Corporations 2008 Form 10-K*
Incorporated herein by reference to Exhibit 10.3 to
the Corporations Annual Report on Form 10-K
for the year ended December 31, 2009 (2009
Form 10-K)*
Incorporated herein by reference to Exhibit 10.2 of
the Corporations 2nd Quarter 2004
Form 10-Q*
10.5 Amendment to the Corporations ERISA Excess Pension Plan,
as amended and restated
10.6 The Corporations ERISA Excess Pension Plan, as amended and
restated effective January 1, 2009
10.7 Amendment 2009-1 to the Corporations ERISA Excess Plan as
amended and restated effective January 1, 2009
10.8 Amendment 2011-1 to the Corporations ERISA Excess Pension
Plan, as amended and restated effective January 1, 2009
10.9 The Corporations Key Executive Equity Program, as amended
and restated
10.10 The Corporations Key Executive Equity Program, as amended
and restated effective January 1, 2009
10.11 Amendment 2009-1 to the Corporations Key Executive Equity
Program as amended and restated as of January 1, 2009
10.12 The Corporations Supplemental Incentive Savings Plan, as
amended and restated
10.13 The Corporations Supplemental Incentive Savings Plan, as
amended and restated effective January 1, 2009
10.14 The Corporations Supplemental Incentive Savings Plan, as
amended and restated May 5, 2009
10.15 Amendment 2009-1 to the Corporations Supplemental Incentive
Savings Plan, as amended and restated May 5, 2009
10.16 Second Amendment to the Corporations Supplemental
Incentive Savings Plan, as amended and restated May 5, 2009
10.17 The Corporations Supplemental Incentive Savings Plan, as
amended and Restated effective January 1, 2010
10.18 The Corporation and Affiliates Deferred Compensation Plan, as
amended and restated
10.19 The Corporation and Affiliates Deferred Compensation Plan, as
amended and restated effective January 1, 2009
10.20 The Corporation and Affiliates Deferred Compensation Plan, as
amended and restated May 5, 2009
10.21 Amendment 2009-1 to the Corporation and Affiliates Deferred
Compensation Plan, as amended and restated May 5, 2009
10.22 Amendment 2010-1 to the Corporation and Affiliates Deferred
Compensation Plan, as amended and restated May 5, 2009
10.23 Amendment 2011-1 to the Corporation and Affiliates Deferred
Compensation Plan, as amended and restated May 5, 2009
Incorporated herein by reference to Exhibit 10.5 of
the Corporations Annual Report on Form 10-K
for the year ended December 31, 2010 (2010
Form 10-K)*
Incorporated herein by reference to Exhibit 10.4 to
the Corporations 2008 Form 10-K*
Incorporated herein by reference to Exhibit 10.6 to
the Corporations 2009 Form 10-K*
Filed herewith*
Incorporated herein by reference to Exhibit 10.3 of
the Corporations 2nd Quarter 2004
Form 10-Q*
Incorporated herein by reference to Exhibit 10.6 to
the Corporations 2008 Form 10-K*
Incorporated herein by reference to Exhibit 10.9 to
the Corporations 2009 Form 10-K*
Incorporated herein by reference to Exhibit 10.4 of
the Corporations 2nd Quarter 2004
Form 10-Q*
Incorporated herein by reference to Exhibit 4.3 to
the Registration Statement on Form S-8 filed by
the Corporation on January 22, 2009*
Incorporated herein by reference to Exhibit 10.61
to the Corporations Quarterly Report on
Form 10-Q for the quarter ended June 30, 2009
(2nd Quarter 2009 Form 10-Q)*
Incorporated herein by reference to Exhibit 10.13
to the Corporations 2009 Form 10-K*
Incorporated herein by reference to Exhibit 10.15
of the Corporations 2010 Form 10-K*
Filed herewith*
Incorporated herein by reference to Exhibit 10.7 of
the Corporations 2nd Quarter 2004
Form 10-Q*
Incorporated herein by reference to Exhibit 4.5 of
the Registration Statement on Form S-8 filed by
the Corporation on January 22, 2009*
Incorporated herein by reference to Exhibit 10.62
to the Corporations 2nd Quarter 2009
Form 10-Q*
Incorporated herein by reference to Exhibit 10.17
to the Corporations 2009 Form 10-K*
Incorporated herein by reference to Exhibit 10.20
of the Corporations 2010 Form 10-K*
Filed herewith*
PNC Financial Services Group, Inc. Form 10-K E-3
 10.24 AJCA transition amendments to the Corporations Supplemental
Incentive Savings Plan and the Corporation and Affiliates
Deferred Compensation Plan
10.25 Further AJCA transition amendments to the Corporation and
Affiliates Deferred Compensation Plan
10.26 The Corporation and Affiliates Deferred Compensation and
Incentive Plan, effective as of January 1, 2012
10.27 The Corporations 2006 Incentive Award Plan, as amended and
restated effective as of March 11, 2011
10.28 Addendum to the Corporations 2006 Incentive Award Plan,
effective as of January 26, 2012
10.29 The Corporations 1997 Long-Term Incentive Award Plan, as
amended and restated
10.30 The Corporations 1996 Executive Incentive Award Plan, as
amended and restated effective as of January 1, 2007
10.31 The Corporations Directors Deferred Compensation Plan, as
amended and restated
10.32 The Corporations Directors Deferred Compensation Plan, as
amended and restated effective January 1, 2012
10.33 The Corporations Outside Directors Deferred Stock Unit Plan,
as amended and restated
10.34 The Corporations Outside Directors Deferred Stock Unit Plan,
as amended and restated effective January 1, 2012
10.35 Amended and Restated Trust Agreement between PNC
Investment Corp., as settlor, and Hershey Trust Company, as
trustee
10.36 Trust Agreement between PNC Investment Corp., as settlor, and
PNC Bank, National Association, as trustee
10.37 Certificate of Corporate Action for Grantor Trusts effective
January 1, 2012
10.38 The Corporations Employee Stock Purchase Plan, as amended
and restated as of January 1, 2009
10.39 Amendment 2011-1 to the Corporations Employee Stock
Purchase Plan, as amended and restated effective January 1,
2009
E-4 PNC Financial Services Group, Inc. Form 10-K
Incorporated herein by reference to Exhibit 10.8 of
the Corporations Annual Report on Form 10-K
for the year ended December 31, 2005 (2005
Form 10-K)*
Incorporated herein by reference to Exhibit 10.12
to the Corporations 2008 Form 10-K*
Incorporated herein by reference to Exhibit 4.4 of
the Corporations Registration Statement on
Form S-8 No.333-177896 filed November 10,
2011*
Incorporated herein by reference to Exhibit 10.70
of the Corporations Quarterly Report on
Form 1O-Q for the quarter ended March 31,
2011 (1st Quarter 2011 Form 10-Q)*
Filed herewith*
Incorporated herein by reference to Exhibit 10.5 of
the Corporations 2nd Quarter 2004
Form 10-Q*
Incorporated herein by reference to Exhibit 10.10
of the Corporations Annual Report on
Form 10-K for the year ended December 31,
2007 (2007 Form 10-K)*
Incorporated herein by reference to Exhibit 10.12
of the Corporations Quarterly Report on
Form 10-Q for the quarter ended March 31,
2004 (1st Quarter 2004 Form 10-Q)*
Filed herewith*
Incorporated herein by reference to Exhibit 10.13
of the Corporations 1st Quarter 2004
Form 10-Q*
Filed herewith*
Incorporated herein by reference to Exhibit 10.35
of the Corporations Quarterly Report on
Form 10-Q for the quarter ended September 30,
2005 (3rd Quarter 2005 Form 10-Q)*
Incorporated herein by reference to Exhibit 10.34
of the Corporations 3rd Quarter 2005
Form 10-Q*
Filed herewith*
Incorporated herein by reference to Exhibit 99.1 to
the Registration Statement on Form S-8 filed by
the Corporation on December 31, 2008
Filed herewith
10.40 Forms of employee stock option, restricted stock, restricted Incorporated herein by reference to Exhibit 10.30
deferral, and incentive share agreements of the Corporations 3rd Quarter 2004
Form 10-Q*
10.41 2005 forms of employee stock option, restricted stock and Incorporated herein by reference to Exhibit 10.28
restricted deferral agreements of the Corporations Annual Report on
Form 10-K for the year ended December 31,
2004 (2004 Form 10-K)*
10.42 2006 forms of employee stock option, restricted stock and Incorporated herein by reference to Exhibit 10.17
restricted deferral agreements of the Corporations 2005 Form 10-K*
10.43 Forms of employee stock option and restricted stock agreements Incorporated by reference to Exhibit 10.40 of the
under 2006 Incentive Award Plan Corporations Quarterly Report on Form 10-Q
for the quarter ended June 30, 2006*
10.44 2006 forms of employee incentive performance unit and senior Incorporated herein by reference to Exhibit 10.20
officer change in control severance agreements of the Corporations Annual Report on
Form 10-K for the year ended December 31,
2006 as filed on March 1, 2007 (2006
Form 10-K)*
10.45 2007 forms of employee stock option and restricted stock Incorporated herein by reference to Exhibit 10.21
agreements of the Corporations 2006 Form 10-K*
10.46 2006-2007 forms of employee incentive performance units Incorporated herein by reference to Exhibit 10.51
agreements of the Corporations Quarterly Report on
Form 10-Q for the quarter ended June 30, 2007
(2nd Quarter 2007 Form 10-Q)*
10.47 2008 forms of employee stock option and restricted stock/share Incorporated herein by reference to Exhibit 10.26
unit agreements of the Corporations 2007 Form 10-K*
10.48 2008 forms of employee performance units agreements Incorporated herein by reference to Exhibit 10.33
to the Corporations 2008 Form 10-K*
10.49 Form of employee stock option agreement with varied vesting Incorporated herein by reference to Exhibit 10.50
schedule or circumstances of the Corporations Current Report on
Form 8-K filed April 18, 2008*
10.50 Form of employee restricted stock agreement with varied vesting Incorporated herein by reference to Exhibit 10.51
schedule or circumstances of the Corporations Current Report on
Form 8-K filed April 18, 2008*
10.51 Form of employee stock option agreement with performance Incorporated herein by reference to Exhibit 10.54
vesting schedule of the Corporations Quarterly Report on
Form 10-Q for the quarter ended June 30, 2008*
10.52 2009 forms of employee stock option, restricted stock, restricted Incorporated by reference to Exhibit 10.61 to the
share unit and performance unit agreements Corporations Quarterly Report on Form 10-Q
for the quarter ended March 31, 2009*
10.53 Form of agreement regarding portion of salary payable in stock Incorporated by reference to Exhibit 10.63 to the
units Corporations Current Report on Form 8-K filed
August 21, 2009*
10.54 Form of agreement for long-term restricted stock Incorporated by reference to Exhibit 10.64 to the
Corporations Current Report on Form 8-K filed
December 23, 2009*
10.55 Form of agreement for long-term stock Incorporated by reference to Exhibit 10.65 to the
Corporations Current Report on Form 8-K filed
December 23, 2009*
10.56 2010 forms of employee stock option, restricted stock, and Incorporated herein by reference to Exhibit 10.48
restricted share unit agreements to the Corporations 2009 Form 10-K*

PNC Financial Services Group, Inc. Form 10-K E-5

 10.57 2010 forms of employee performance units agreements Incorporated herein by reference to Exhibit 10.75
of the Corporations Quarterly Report on
Form 10-Q for the quarter ended September 30,
2010*
10.58 2011 forms of employee stock option, restricted stock, restricted Incorporated herein by reference to Exhibit 10.71
share unit and performance unit agreements of the Corporations 1st Quarter 2011
Form 10-Q*
10.59 Forms of director stock option and restricted stock agreements Incorporated herein by reference to Exhibit 10.32
of the Corporations 3rd Quarter 2004
Form 10-Q*
10.60 2005 form of director stock option agreement Incorporated herein by reference to Exhibit 10.33
of the Corporations Quarterly Report on
Form 10-Q for the quarter ended March 31,
2005*
10.61 Form of time sharing agreements between the Corporation and Incorporated herein by reference to Exhibit 10.39
certain executives to the Corporations 2008 Form 10-K*
10.62 Form of change of control employment agreements Incorporated herein by reference to Exhibit 10.72
of the Corporations 1st Quarter 2011
Form 10-Q*
10.63 The National City Corporation 2004 Deferred Compensation Incorporated herein by reference to Exhibit 10.35
Plan, as amended and restated effective January 1, 2005 to National City Corporations Quarterly Report
on Form 10-Q for the quarter ended March 31,
2006
10.64 Amendment to The National City Corporation 2004 Deferred Incorporated herein by reference to Exhibit 10.56
Compensation Plan, as amended and restated effective of the Corporations 2010 Form 10-K
January 1, 2005
10.65 BlackRock, Inc. 2002 Long-Term Retention and Incentive Plan Incorporated herein by reference to the Quarterly
Report on Form 10-Q of BlackRock Holdco 2,
Inc. (Commission File No. 001-15305) (referred
to herein as Old BlackRock) for the quarter
ended September 30, 2002 (Old BlackRock 3rd
Quarter 2002 Form 10-Q)
10.66 First Amendment to the BlackRock, Inc. 2002 Long-Term Incorporated herein by reference to the Quarterly
Retention and Incentive Plan Report on Form 10-Q of Old BlackRock
(Commission File No. 001-15305) for the
quarter ended March 31, 2004
10.67 Second Amendment to the BlackRock, Inc. 2002 Long-Term Incorporated herein by reference to the Annual
Retention and Incentive Plan Report on Form 10-K of Old BlackRock
(Commission File No. 001-15305) for the year
ended December 31, 2004
10.68 Share Surrender Agreement, dated October 10, 2002, among Old Incorporated herein by reference to the Old
BlackRock, PNC Asset Management, Inc., and the BlackRock 3rd Quarter 2002 Form 10-Q
Corporation
10.69 First Amendment, dated as of February 15, 2006, to the Share Incorporated herein by reference to the Current
Surrender Agreement among Old BlackRock, PNC Bancorp, Report on Form 8-K of Old BlackRock
Inc. and the Corporation (Commission File No. 001-15305) filed
February 22, 2006 (Old BlackRock
February 22, 2006 Form 8-K)

E-6 PNC Financial Services Group, Inc. Form 10-K

10.70 Second Amendment to Share Surrender Agreement made and Incorporated herein by reference to Exhibit 10.50
entered into as of June 11, 2007 by and between the of the Corporations Current Report on
Corporation, BlackRock, Inc., and PNC Bancorp, Inc. Form 8-K filed June 14, 2007
10.71 Third Amendment to Share Surrender Agreement, dated as of Incorporated herein by reference to Exhibit 10.3 of
February 27, 2009, between the Corporation and BlackRock, BlackRock, Inc.s Current Report on Form 8-K
Inc. filed February 27, 2009
10.72 Amended and Restated Implementation and Stockholder Incorporated herein by reference to Exhibit 10.2 of
Agreement, dated as of February 27, 2009, between the BlackRock, Inc.s Current Report on Form 8-K
Corporation and BlackRock, Inc. filed February 27, 2009
10.73 Amendment No. 1, dated as of June 11, 2009, to the Amended Incorporated herein by reference to Exhibit 10.2 of
and Restated Implementation and Stockholder Agreement BlackRock, Inc.s Current Report on Form 8-K
between the Corporation and BlackRock, Inc. filed June 17, 2009
10.74 PNC Bank, National Association US $20,000,000,000 Global Incorporated herein by reference to Exhibit 10.29
Bank Note Program for the Issue of Senior and Subordinated of the Corporations 3rd Quarter 2004
Bank Notes with Maturities of more than Nine Months from Form 10-Q
Date of Issue Distribution Agreement dated July 30, 2004
10.75 Stock Purchase Agreement, dated as of June 19, 2011, among Incorporated herein by reference to Exhibit 2.1 of
the corporation, RBC USA Holdco Corporation and Royal the Corporations Current Report on Form 8-K
Bank of Canada (the schedules and exhibits have been omitted filed June 20, 2011
pursuant to Item 601(b)(2) of Regulation S-K)
10.76 Stock Purchase Agreement, dated as of February 1, 2010, by and Incorporated herein by reference to Exhibit 2.1 to
between the Corporation and The Bank of New York Mellon the Corporations Current Report on Form 8-K
Corporation filed February 3, 2010
12.1 Computation of Ratio of Earnings to Fixed Charges Filed herewith
12.2 Computation of Ratio of Earnings to Fixed Charges and Filed herewith
Preferred Dividends
21 Schedule of Certain Subsidiaries of the Corporation Filed herewith
23.1 Consent of PricewaterhouseCoopers LLP, the Corporations Filed herewith
Independent Registered Public Accounting Firm
23.2 Consent of Deloitte & Touche LLP, Independent Registered Filed herewith
Public Accounting Firm of BlackRock, Inc.
24 Powers of Attorney Filed herewith
31.1 Certification of Chairman and Chief Executive Officer pursuant Filed herewith
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 Filed herewith
of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chairman and Chief Executive Officer pursuant Filed herewith
to 18 U.S.C. Section 1350
32.2 Certification of Chief Financial Officer pursuant to Filed herewith
18 U.S.C. Section 1350
99.1 Form of Order of the Securities and Exchange Commission Incorporated herein by reference to Exhibit 99.3 of
Instituting Public Administrative Procedures Pursuant to the Corporations Current Report on Form 8-K
Section 8A of the Securities Act of 1933 and 21C of the dated and filed July 18, 2002
Securities Exchange Act of 1934, Making Findings and
Imposing Cease- and-Desist Order
99.2 Audited consolidated financial statements of BlackRock, Inc. as Filed herewith
of December 31, 2011 and 2010 and for each of the three
years ended December 31, 2011

PNC Financial Services Group, Inc. Form 10-K E-7

 99.3 Consent order between The PNC Financial Services Group, Inc. Incorporated herein by reference to Exhibit 99.1 of
and the Board of Governors of the Federal Reserve System the Corporations Current Report on Form 8-K
filed April 14, 2011
99.4 Consent order between PNC Bank, National Association and the Incorporated herein by reference to Exhibit 99.2 of
Office of the Comptroller of the Currency the Corporations Current Report on Form 8-K
filed April 14, 2011
101 Interactive Data File (XBRL) Filed herewith
+ Incorporated document references to filings by the Corporation are to SEC File No. 001-09718, to filings by National City
Corporation are to SEC File No. 001-10074, to filings by BlackRock through its second quarter 2006 Form 10-Q (referred to
herein as Old BlackRock) are to BlackRock Holdco 2, Inc. SEC File No. 001-15305, and to filings by BlackRock, Inc. are to
SEC File No. 001-33099.
* Denotes management contract or compensatory plan.

You can obtain copies of these Exhibits electronically at the SECs website at www.sec.gov or by mail from the Public Reference
Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. The Exhibits are also available as part of this
Form 10-K on PNCs corporate website at www.pnc.com/secfilings. Shareholders and bondholders may also obtain copies of
Exhibits without charge by contacting Shareholder Relations at (800) 843-2206 or via e-mail at investor.relations@pnc.com. The
Interactive Data File (XBRL) exhibit is only available electronically.

E-8 PNC Financial Services Group, Inc. Form 10-K

 EXHIBIT 31.1

In accordance with Exchange Act Rules 13a-14(f) and 15d-14(f), this certification does not relate to Interactive Data Files as defined
in Rule 11 of Regulation S-T.

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, James E. Rohr, certify that:
1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2011 of The PNC Financial Services Group,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrants internal control over financial reporting.

Date: February 29, 2012

/s/ James E. Rohr

James E. Rohr
Chairman and Chief Executive Officer
 EXHIBIT 31.2

In accordance with Exchange Act Rules 13a-14(f) and 15d-14(f), this certification does not relate to Interactive Data Files as defined
in Rule 11 of Regulation S-T.

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Richard J. Johnson, certify that:
1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2011 of The PNC Financial Services Group,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrants internal control over financial reporting.

Date: February 29, 2012

/s/ Richard J. Johnson

Richard J. Johnson
Executive Vice President and Chief Financial
Officer
 EXHIBIT 32.1

In accordance with Exchange Act Rules 13a-14(f) and 15d-14(f), this certification does not relate to Interactive Data Files as defined
in Rule 11 of Regulation S-T.

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K for the year ended December 31, 2011 of The PNC Financial Services Group,
Inc. (Corporation) as filed with the Securities and Exchange Commission on the date hereof (Report), I, James E. Rohr, Chairman and
Chief Executive Officer of the Corporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Corporation for the dates and periods covered by the Report.

This certificate is being made for the exclusive purpose of compliance by the Chief Executive Officer of the Corporation with the
requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be used by any person or for any reason other than as
specifically required by law.

/s/ James E. Rohr

James E. Rohr
Chairman and Chief Executive Officer

February 29, 2012

 EXHIBIT 32.2

In accordance with Exchange Act Rules 13a-14(f) and 15d-14(f), this certification does not relate to Interactive Data Files as defined
in Rule 11 of Regulation S-T.

CERTIFICATION BY CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K for the year ended December 31, 2011 of The PNC Financial Services Group,
Inc. (Corporation) as filed with the Securities and Exchange Commission on the date hereof (Report), I, Richard J. Johnson, Executive
Vice President and Chief Financial Officer of the Corporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Corporation for the dates and periods covered by the Report.

This certificate is being made for the exclusive purpose of compliance by the Chief Financial Officer of the Corporation with the
requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be used by any person or for any reason other than as
specifically required by law.

/s/ Richard J. Johnson

Richard J. Johnson
Executive Vice President and Chief Financial
Officer

February 29, 2012